Constellation Brands Stock To $127?
Constellation Brands (STZ) stock has fallen 8.0% during the past day, and is currently trading at $149.30. Our multi-factor assessment suggests that it may be time to sell STZ stock. We have, overall, a pessimistic view of the stock, and a price of $127 may not be out of reach. We believe there are several things to fear in STZ stock given its overall Weak operating performance and financial condition. Hence, despite its Moderate valuation, this makes the stock look Risky.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Moderate |
| What you get: | |
| Growth | Very Weak |
| Profitability | Strong |
| Financial Stability | Weak |
| Downturn Resilience | Moderate |
| Operating Performance | Weak |
| Stock Opinion | Risky |
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Let’s get into details of each of the assessed factors but before that, for quick background: With $26 Bil in market cap, Constellation Brands provides production, import, marketing, and sales of beer, wine, and spirits across the US, Canada, Mexico, New Zealand, and Italy, featuring numerous renowned wine brands.
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[1] Valuation Looks Moderate
| STZ | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 2.8 | 3.3 |
| Price-to-Earnings Ratio | 23.5 | 24.9 |
| Price-to-Free Cash Flow Ratio | 14.8 | 21.1 |
This table highlights how STZ is valued vs broader market. For more details see: STZ Valuation Ratios
[2] Growth Is Very Weak
- Constellation Brands has seen its top line shrink at an average rate of -0.5% over the last 3 years
- Its revenues have fallen -7.9% from $10 Bil to $9.4 Bil in the last 12 months
- Also, its quarterly revenues declined -9.8% to $2.2 Bil in the most recent quarter from $2.5 Bil a year ago.
| STZ | S&P 500 | |
|---|---|---|
| 3-Year Average | -0.5% | 5.6% |
| Latest Twelve Months* | -7.9% | 6.4% |
| Most Recent Quarter (YoY)* | -9.8% | 7.5% |
This table highlights how STZ is growing vs broader market. For more details see: STZ Revenue Comparison
[3] Profitability Appears Strong
- STZ last 12 month operating income was $2.9 Bil representing operating margin of 31.3%
- With cash flow margin of 28.8%, it generated nearly $2.7 Bil in operating cash flow over this period
- For the same period, STZ generated nearly $1.1 Bil in net income, suggesting net margin of about 11.8%
| STZ | S&P 500 | |
|---|---|---|
| Current Operating Margin | 31.3% | 18.7% |
| Current OCF Margin | 28.8% | 20.6% |
| Current Net Income Margin | 11.8% | 12.8% |
This table highlights how STZ profitability vs broader market. For more details see: STZ Operating Income Comparison
[4] Financial Stability Looks Weak
- STZ Debt was $11 Bil at the end of the most recent quarter, while its current Market Cap is $26 Bil. This implies Debt-to-Equity Ratio of 40.9%
- STZ Cash (including cash equivalents) makes up $152 Mil of $22 Bil in total Assets. This yields a Cash-to-Assets Ratio of 0.7%
| STZ | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 40.9% | 20.4% |
| Current Cash-to-Assets Ratio | 0.7% | 7.3% |
[5] Downturn Resilience Is Moderate
STZ saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- STZ stock fell 20.1% from a high of $261.05 on 2 December 2022 to $208.68 on 5 January 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 19 July 2023
- Since then, the stock increased to a high of $272.80 on 31 July 2023 , and currently trades at $149.30
| STZ | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -20.1% | -25.4% |
| Time to Full Recovery | 195 days | 464 days |
2020 Covid Pandemic
- STZ stock fell 49.3% from a high of $208.34 on 20 February 2020 to $105.64 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 3 December 2020
| STZ | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -49.3% | -33.9% |
| Time to Full Recovery | 255 days | 148 days |
2008 Global Financial Crisis
- STZ stock fell 62.8% from a high of $29.02 on 1 January 2007 to $10.80 on 12 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 13 July 2012
| STZ | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -62.8% | -56.8% |
| Time to Full Recovery | 1,339 days | 1,480 days |
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.
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