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Aggressive Growth

Boston Beer Co. (SAM - Analyst Report) posts four positive earnings surprises in a row and becomes a Zacks #2 Rank (Buy). With Cinco de Mayo right around the corner, a cold Sam Adams may find its way into an aggressive growth investors hands near you!

Company Description

The Boston Beer Company, Inc. makes and sells alcohol beverages. The company sells approximately 50 beers under the Samuel Adams or the Sam Adams brand names as well as a few other brands. The Boston Beer Company, Inc. was founded in 1984 and is based in Boston, Massachusetts.

Boston Beer Tops Earnings Estimates in Four Straight Quarters

Boston Beer has topped earnings estimates in each of the last four quarters. The average beat over that same time frame has been almost $0.03 or 30% ahead of the Zacks Consensus Estimate. Skewing that average is the huge beat in the June 2011 quarter.

The June 2011 quarter saw the company miss on the topline, reporting sales of $134 million, $4 million less than the Zacks Consensus Estimate and EPS of $1.97, $0.80 ahead of the Zacks Consensus Estimate of $1.17. That translates into a beat of more than 68%. The stock, however, fell in the session following the earnings report by more than 3%.

Over the four quarter positive surprise streak, the stock moved the most following the September 2011 quarter. The company again missed on the top line, but the miss was approximately $1 million while the bottom line outperformed by 9%. Coming in $0.10 higher than the Zacks Consensus Estimate helped push Boston Beer's stock higher by nearly 12% following the release.

Boston Beer Most Recent Reported Earnings

On May 2, 2012 the company reported revenue of $113 million, roughly $2 million ahead of the Zacks Consensus Estimate and up from $102 million reported in year ago quarter. In addition, earnings per share came in at $0.56, $0.16 higher than the Zacks Consensus Estimate of $0.40. The beat of 40% was a reacceleration of earnings that aggressive growth investors tend to look for.

Valuations

The valuation "pitcher" for Boston Beer is not as frothy as one might expect given the recent history of solid positive earnings surprises. A trailing PE multiple of 23x is just a little above the industry average of 19.9x, while the forward PE has bubbled up to 26x compared to a 17x industry average. The price to book multiple, generally a more conservative measure, has Boston Beer trading at 5x, just under the industry average of 5.3x. The intoxicating metric is the price to sales, with the company trading at 1.8x compared to a 3.2x industry average. Given the recent solid execution, aggressive growth investors will likely drink to this valuation.

The Chart

The price and consensus chart for Boston Beer shows why this stock is a Zacks #2 Rank (Buy) instead of a Zacks #1 Rank (strong Buy). Throughout 2009 and 2010 the company brewed up some good earnings and the stock moved higher as a result. Toward the end of 2010 the estimates started to come down for 2011 as shown in the blue line and for future estimates as well. Those lower earnings projects cause the stock to fall, but the company has since returned to growing its earnings. Boston Beer is Zacks #2 Rank (Buy).

Boston Beer - ticker SAM>
 
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Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

Follow Brian Bolan on twitter at @BBolan1

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