Boston Beer Co Inc (SAM), Johnson & Johnson (JNJ), McDonald’s Corporation (MCD): Should You Be Worried That Corporate Earnings Are Slowing Down?

Page 1 of 2

Several reports are circulating in the financial media that EPS growth for the S&P 500 member companies is slowing down to a trickle (or even poised for an outright drop) and P/E ratios are getting too high. Some analysts say that by later this year, earnings will only grow by single digits.

Should this concern the average retail investor?

Not if you invest for the long term and look for companies that have solid fundamentals in place. Let’s discuss three businesses to consider for your portfolio.

This Sam is for you

Boston Beer Co Inc (NYSE:SAM), the brewer of some of the most popular craft beers, has experienced strong growth over the recent past and the long term. EPS has appreciated more than 37% in the last quarter and 15% for the trailing 12 months, and it has averaged 23% for the past five years. The stock has followed suit, rising more than 80% since last November and tripling since 2010.

Boston Beer Co Inc (NYSE:SAM)

This strong performance will continue so long as the key fundamentals remain in place.

The company has little long-term debt, which will allow it to spend funds on research and development and new products, which Boston Beer Co Inc (NYSE:SAM) introduces on a regular basis. This summer, its signature Samuel Adams Boston Lager brand was first offered in a can.

Boston Beer Co Inc (NYSE:SAM) has a strong management team in place. Founder and chairman Jim Koch has given up the CEO duties but remains an integral part of the company’s operations. He still has a vested interest in how Boston Beer performs. He even uses an old family recipe to brew the beer and has set up a sort of venture capital fund for up-and-coming entrepreneurs in the food and hospitality industry.

Finally, Boston Beer Co Inc (NYSE:SAM) had more than $27 million in free cash flow available at the end of 2012.

A caveat (and potential negative) is that the stock is not a value play by any measure: Its P/E is above 40, its price-to-book ratio is greater than 10, and its PEG is higher than three. All are indications that SAM is overvalued. However, based on the strong fundamentals and projections of continued success, an investment in Boston Beer Co Inc (NYSE:SAM) may be warranted for those needing a growth stock in their portfolio for the long term.

No Band-Aids needed

Johnson & Johnson (NYSE:JNJ), the monolithic maker of medical devices, pharmaceuticals, and consumer health-care products, is another solid company to consider. Johnson and Johnson is growing its earnings again after a brief lull in 2011 and 2012. On a TTM basis, EPS has increased by about 50%.

The company has been using acquisitions, such as Synthes, and new product introductions (several new Aveeno brand items were introduced recently) to expand.

It has a long-term debt-to-equity ratio of only 14%. This allows the company to use cash more efficiently to fund its extensive drug research and file lucrative, multiyear patents, which gives it a wide moat to fend off competitors.

Another selling point for Johnson & Johnson (NYSE:JNJ) is its history of growing its dividend. It has increased the payout every year for the past half-century, pumping it up at a compounded annual rate of 14%. The stock is a good one to consider for a retirement portfolio.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!