With Strong Cash Flow, Constellation Brands Stock Poised to Rise?

Constellation Brands (STZ) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

What Is Happening With STZ

STZ stock is currently trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also below its 3-year average.

Here is what’s going well for the company: Constellation Brands’ stock is up 17.78% year-to-date by February 13, 2026. Q3 FY26 revenue surpassed estimates despite a 9.8% year-over-year decline. The beer segment saw dollar share gains, led by Modelo Especial and pricing actions, countering macroeconomic headwinds. The wine and spirits portfolio is strategically divesting brands for a high-end focus, though this resulted in a 51% sales decline in that segment, aiming for future profitability. FY26 comparable EPS guidance remains firm.

STZ Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 6.8%, but Constellation Brands stock does
• Strong Margin: Last 12 month operating margin of 31.3%
• Growth: Last 12 revenue growth of -7.9% – revenue decline, but this selection is all about high yield and margin
• Valuation: STZ stock currently trading at 43% below 2Y high, 10% below 1M high, and at a PS lower than 3Y average.

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 in every major crisis despite its strengths. During the Dot-Com Bubble, it dropped nearly 30%, and in the Global Financial Crisis, it plunged over 62%. The 2018 Correction brought about a 35% dip, while the Covid Pandemic triggered almost a 50% slide. Even the more recent Inflation Shock shaved off 20%. Solid fundamentals matter, but when the market sells off hard, STZ isn’t immune to significant pullbacks. 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. Qualcomm (QCOM)
2. Lululemon Athletica (LULU)
3. Omnicom (OMC)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

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 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

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