Is The Market Pricing Boston Beer Company Fairly?
Boston Beer Company (NYSE: SAM) is a large craft brewer in the United States, selling roughly 3.8 million barrels of its proprietary products in FY 2017. It sells over sixty beers under the Samuel Adams brand name, besides flavored malt beverages, hard cider beverages, hard sparkling water, and beers under other brand names. While the company was able to meet consensus expectations in the fourth quarter, it faced declining revenues of close to 6%, as a result of falling volumes of its Samuel Adams beers and Angry Orchard cider. Moreover, although SAM was able to grow its EPS, that was largely a result of the share repurchases undertaken by the company. The growth of other craft beers has hit the company hard, and it has faced dipping market share in recent years. On the other hand, Boston Beer Company expects a better 2018, with volumes projected to increase, in a range of flat to positive 6%, and a target of national price increases per barrel of between zero and 2%.
We have created an interactive dashboard analysis to estimate Boston Beer Company’s valuation based on the expected revenues for FY 2018. You can make changes to these variables to reach your own price estimate for the stock.
We have arrived at a $181.65 price estimate for Boston Beer Company based on revenue projections of $886 million for 2018, a P/S multiple of 2.48, which is slightly lower than that for the previous year, due to its poor performance in 2017, as well as the industry average, and a share count of 12.10 million. The market price stood at $180.50 as of March 19, which is roughly in-line with our price estimate.
Boston Beer Company reports its revenues under one operating segment. Hence, to arrive at the company’s expected revenues for 2018, we have forecast the revenue per barrel and the number of barrels, and multiplied the two metrics. Our projections are based on the guidance provided by the company, as well as industry trends and SAM’s past performance.
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