Should You Buy the Dip in This Beer Stock?

SAM's fundamental setup is worth a closer look

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Adult beverage giant Boston Beer Company, Inc. (NYSE:SAM) announced back in September its subsidiary would be entering the booming cannabis beverage market in Canada with production kicking off in the fourth quarter. The non-alcoholic and cannabis-infused beverages will potentially launch in the U.S. pending traction in the more developed Canadian cannabis market.

Since that news was mostly speculative, it didn't have an impact on SAM. What did though, was a sharp post-earnings bear gap after the company withdrew its fiscal year guidance. Fast forward a few months and the stock is down 55% in 2021, with its descending 40-day moving average keeping a tight lid on breakouts since October. More underperformance lead to downgrades, considering 60% of the brokerages in coverage maintain a "buy" or better rating.

SAM Stock Chart

Boston Beer Company stock has begun to reach an attractive valuation after its bearish run over the past year. SAM has a forward price-earnings ratio of 22.57, which signals a significant expected improvement from its current inflated price-earnings ratio of 55.53.

The Samuel Adams parent company has also maintained strong and consistent top-line growth in recent years, increasing its revenues 25% since fiscal 2020 and 152% since fiscal 2017. In addition, The Boston Beer Company had previously grown its net income 107% between fiscal 2018 and fiscal 2020. However, SAM’s bottom-line figures have plummeted over the past year, with its trailing 12-month net income down 48% since fiscal 2020, potentially setting up Boston Beer Company stock as a recovery play option.

 

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