Molson Coors Brewing Company (TAP): Good Product But An Expensive Stock

Valuation

Molson Coors trades for 14.5 times TTM earnings, which are forecast to rise by around 5% annually over the next several years.  I personally think that the stock is a bit overpriced right now, with slow growth and about $1 billion in net debt.  Unless the company provides new growth plans or a rosier outlook for the next several years, I actually think we’ll see a pullback to the lower end of the trading range mentioned earlier.

Anheuser-Busch InBev trades at 19.2 times earnings, however they are growing more aggressively by far.  Consensus estimates call for earnings to rise at a 14.3% average annual rate over the next three years, which more than justifies the higher valuation.

Frequent readers know my “valuation rule” to roughly estimate whether a stock is fairly valued.  Take the forward growth rate and double it.  This number should be more than the P/E multiple, unless the company has a gigantic cash position or other extenuating issues.  Anheuser-Busch Inbev qualifies.  Molson Coors, sadly, does not.

Even the Boston Beer Company looks more attractive as an investment.  The maker of Sam Adams trades at 31 times earnings, with a 15% forward growth rate and has about $50 million in cash and NO debt whatsoever.

Conclusion

As far as Molson Coors goes, my opinion is to basically “wait and see.”  In other words, I need the company to give me a reason to invest in it.  Although I believe they make a quality product, I need them to show me signs of growth comparable to their peers, or at least growth at a level that is on par with the valuation.

The article Good Product But An Expensive Stock originally appeared on Fool.com and is written by Matthew Frankel.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!