Adding insult to injury
Valuations over the last year for Boston Beer Co Inc (NYSE:SAM) have become increasingly intoxicating. Since Q1 of 2012, their PE has crept up from the low 20s to elevated levels near 40 just recently before earnings, and is now hanging out in the mid-30s, while at the same time their PEG has shot up to 3 times its projected earnings growth rate for the next five years. These metrics are difficult to digest, even for a growth stock, but in its defense the crafty brewer has made a solid attempt at walking the walk. Revenue has been growing by at least 10% and as much as 30% in the last 5 quarters, except in Q4 2012, and with gross profit margins dialed in between 55 and 60 percent, their quest into growing profitability appears to hold some merit.
Boston Beer has performed spectacularly over the last 52 weeks, gaining 37% in its share price while continuing to buyback shares, but that dramatic rise also makes the assessment of its current value that much more difficult. It might be wise to sip responsibly on Boston Beer until further clarity is available on their true impact in the quickly growing, and highly competitive market of craft brewing.
The article A Sobering Performance in Craft Brewing originally appeared on Fool.com and is written by Patrick Facey.
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