Has Constellation Brands Stock Quietly Become a Value Opportunity?

We think Constellation Brands (STZ) stock could be a good value buy. It is currently trading lower than average valuation, and has strong margins to go with its modest valuation.

Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve

What Is Happening With STZ

STZ may be down 0% so far this year but is now 37% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.

The stock may not reflect it yet, but here is what’s going well for the company. Despite its 2025 year-to-date decline, Constellation Brands sustains robust margins from its premium beer portfolio, where efficiency keeps gross margins above 54%. Though overall revenue dipped, Modelo drives U.S. market share gains. Wine and spirits focus shifts to higher-margin offerings ($15+) through divestitures. This premiumization targets improved profitability amid consumer shifts; macroeconomic headwinds also factor into the discounted valuation.

STZ Has Strong Margin Play

• Revenue Growth: -5.6% LTM and 0.7% last 3 year average. Not ideal, but this is a margin and value play.
• Strong Margin: Nearly 31.7% 3-year average operating margin.
• No Major Margin Shock: Constellation Brands has avoided any large large margin collapse in the last 12 months.
• Modest Valuation: Despite encouraging fundamentals, STZ stock trades at a PE multiple of 19.8

Below is a quick comparison of STZ fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While STZ stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. STZ took a hit of about 30% during the Dot-Com crash and nearly 63% in the Global Financial Crisis. The 2018 sell-off wiped out roughly 35%, while the Covid selloff saw a drop close to 49%. Even the recent inflation shock caused a 20% dip. The stock has strong fundamentals, but history shows it’s not immune when the market turns south. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read STZ Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell STZ Stock.

Stocks Like STZ

Not ready to act on STZ? Consider these alternatives:

1. Accenture (ACN)
2. PayPal (PYPL)
3. Lululemon Athletica (LULU)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Meaningfully below 1Y high
3. Current P/S < last few year average
4. Strong operating margin
5. P/E ratio below S&P 500 median

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
• Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
• Strategy consistent across market cycles

Portfolios Are The Smarter Way To Invest

Individual stocks are unpredictable. A smart portfolio keeps you invested, limits downside shocks, and provides upside exposure

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.