It's time to add Boston Beer
A summary of the company's financial results, including all of the ratios we Fools like to check out first, can be found in the Fool by Numbers published earlier today. Overall, I'd call the income statement performance great, the balance sheet good, and the cash flow performance disappointing (though this may be only temporary).
Considering the competition from Molson Coors Brewing
From the press release and the way things were discussed on the conference call, it sounds as if the company is close to a deal to construct its own brewery in Massachusetts -- but nothing is decided just yet. The company estimates that a brewery would cost between $120 million and $160 million to construct, which means the company would ultimately need to take on debt. However, the balance sheet is strong, and with the right financing, the company's cash flows are also strong enough to support a fair amount of debt.
The ultimate problem I have with Boston Beer is its valuation. The company is reasonably valued if you believe it can grow its free cash flow at 8%-10% for 10 years, which I must admit is possible. However, I prefer a margin of safety in my investments, and today Boston Beer just doesn't cut it. The case becomes weaker when I adjust the company's free cash flow for tax benefits from stock options and the net effect of its purchases and sales of trading securities (which I reclassify into cash flows from investing activities).
For now, I'll take the beer instead of the stock, please.
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