After reading Boston Beer's
Earnings per share came in at $0.09 against a penny loss a year ago. However, as in the past, revenue growth was a bit of a struggle. But there are reasons for optimism, as the company will begin marketing its light brew more aggressively. The same strategy has delivered solid results for the traditional brews, and given the current move to lower-carb diets, now is the time to get the light brew out in front of folks again.
Don't pay so much attention to revenue, though, that you lose track of the share repurchases and consistent free cash flow that Boston Beer has rewarded investors with the last few years. Investors looking at the earnings release may wonder why I'm trumpeting free cash flow and share repurchases when the company only delivered the cash. It is because I believe Boston Beer made a good decision by not following the same old script and instead holding on to a little cash for the time being. Here's why:
A quick look at the last two years of share buybacks reveals that Boston Beer repurchased 2.78 million shares at an average of $14.26 per stub. However, revenue and free cash flow have been relatively flat the last few years, and at about $19 per stub the stock has increased a robust 33% against the average repurchase price. In addition, the enterprise value-to-free cash flow ratio (EV/FCF) has gone from single digits to 12, which is still affordable but not nearly as attractive as last year, when the company repurchased the bulk of the shares.
For a company like Boston Beer that still has plenty of room for long-term growth but enormous competitors in Anheuser-Busch
Investors should note that Boston Beer -- like Claire's Stores
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Fool contributor Nathan Parmelee wishes he had paid a little more attention to Boston Beer's business and a little less attention to its products. Nathan does not own shares in any of the companies mentioned in this article. Send your feedback to Nathan here.