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4-Star Stocks Poised to Pop: Central European Distribution

By Brian D. Pacampara, CFA – Updated Apr 6, 2017 at 5:49PM

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Market-trouncing returns could be written in this four-star.

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, alcoholic beverage distributor Central European Distribution (CEDC) (Nasdaq: CEDC) has earned a respected four-star ranking.

With that in mind, let's take a closer look at CEDC's business and see what CAPS investors are saying about the stock right now.

CEDC facts

Headquarters (Founded) Mt. Laurel, N.J. (1990)
Market Cap $248 million
Industry Distillers and vintners
Trailing-12-Month Revenue $825.9 million
Management Chairman/CEO William Carey (since 1997)
CFO Christopher Biedermann (since 2005)
Return on Capital (Average, Past 3 Years) 3.3%
Cash/Debt $111.2 million / $1.34 billion
Competitors Diageo (NYSE: DEO)

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 96% of the 687 members who have rated CEDC believe the stock will outperform the S&P 500 going forward. These bulls include All-Stars tenmiles and TSIF, both of whom are ranked in the top 0.1% of our community.

Just last week, tenmiles tapped CEDC as a timely bargain opportunity: "Spirited decline with goodwill writedowns and trouble in Russia, but believe there may be value here from private equity."

In fact, CEDC sports a particularly paltry forward P/E of 4. That represents a clear discount to industry peers Diageo (13.3), Brown-Forman (NYSE: BF-B) (18.5), and Constellation Brands (NYSE: STZ) (9.1).

CAPS All-Star TSIF elaborates on CEDC's earnings miss last week as a possible buying opportunity:

The guidance is ugly, anywhere from a profit to a loss. In reality, however, the news required some interpretation that I don't think some investors took time to give it. The quarterly operating loss of $645 Million included $674 Million of non-cash impairment charges against goodwill and trademarks. The vodka in inventory remains secure. ... The expansion into Europe has been costly and the debt excessive, but overall, the European market should be ready to drink their sorrows as the Eurozone implodes.

The company appears to be cutting some corners and trying to improve pricing and input costs. ... I'm willing to give them some benefit of the doubt that they can sell a recession proof product with a strong brand name in sufficient volume to make a profit. The proof will be in the next few quarters.

What do you think about CEDC, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Interested in another easy way to track CEDC? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of CEDC and Diageo. The Fool owns shares of Diageo.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Stocks Mentioned

Brown-Forman Stock Quote
$68.13 (-0.20%) $0.14
Diageo Plc Stock Quote
Diageo Plc
$187.20 (-0.74%) $-1.39
Constellation Brands Stock Quote
Constellation Brands
$246.38 (-0.11%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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