Strangely, The Boston Beer Company (NYSE: SAM) is among the biggest losers in today’s stock market.
In 2021, Boston Beer (SAM) rose to a high of $1,306.45 on 20 April and fell to $527.15 on 16 September. I calculate Boston Beer lost $763.82 in share value between 20 April and 13 September 2021.
My guess is that the wild price swings show Boston Beer is a meme stock. To explain, Boston Beer makes America’s most popular microbrew, Samuel Adams Boston Lager. Boston Beer makes and markets several other beverage brands.
The Boston Beer brands include: Dogfishhead craft beer, Truly Hard Seltzer, Twisted Tea Hard Iced Tea, Angry Orchard Hard Cider, Coney Island Brewing Company Beers, Angel City Brewery Beers, and Havana Lager.
Is Beer a Value Investment?
The value case for Boston Beer (NYSE: SAM) is simple: Americans drink enormous amounts of beer and many of them prefer microbrews.
For instance, the average American consumed 28.2 gallons of beer in 2021, BeerInfo estimates. That works out to around a six-pack a week or a bottle a day.
Beer sales, however, fell during the pandemic. For instance, retail dollar sales of craft beer fell by 22% in 2020, the Brewers Association estimates. However, overall US beer sales volume only fell by -2.9% in 2020. Craft brewer volume sales fell by 9.3%. Conversely, import beer sales rose by 0.6% in 2020.
I guess craft beer sales because fewer people were eating and drinking out. Hence, fewer people were drinking tap beer. Instead, they drank domestic beer at home. In addition, some people did not have to worry about friends seeing them drinking a Budweiser.
Economic uncertainty could drive some people to buy cheaper domestic beers. On the other hand, home drinkers of quality beers could prefer more consistent foreign brands, such as Heineken and Stella Artois. Finally, some people are more likely to drink hard liquor or wine at home.
Boston Beer is Growing
Interestingly, Stockrow data shows Boston Beer (SAM) is bucking industry trends. For example, Stockrow estimates Boston Beer’s revenues grew by 64.89% in the quarter ending on 31 March 2021.
Impressively, Stockrow credits Boston Beer with seven straight quarters of double-digit revenue growth between 31 December 2019 and 30 June 2021. For instance, Boston Beer’s revenues grew by 33.78% in the quarter ending on 31 December 2019 and 33.32% in the quarter ending on 30 June 2021.
Furthermore, Boston Beer’s quarterly revenues grew from $452.14 million on 30 June 2020 to $602.80 million on 30 June 2021. Similarly, Boston Beer’s quarterly gross profit grew from $211.62 million on 30 June 2020 to $275.69 million on 30 June 2021. In contrast, the quarterly operating income rose slightly from $78.77 million on 30 June 2020 to $80.11 million on 30 June 2021.
How Much Cash does Boston Beer Generate?
Boston Beer’s revenue did not translate into more cash. For example, Boston Beer’s quarterly operating cash flow fell from $83.68 million on 30 June 2020 to $13.21 million on 30 June 2021.
Similarly, the quarterly ending cash flow fell from $144.66 million on 31 March 2021 to -$41.70 million on 30 June 2021. A year earlier, Boston Beer reported a quarterly operating cash flow of -$42.79 million on 30 June 2020.
Conversely, Boston Beer (SAM) is not borrowing much money. Notably, Boston Beer reported a quarterly financing cash flow of -$10.77 million on 30 June 2021. The quarterly financing cash fell from -$93.96 million on 30 June 2020.
Boston Beer’s total debt fell from $76 million on 30 June 2020 to $65 million on 30 2021. Meanwhile, the cash and short-term investments grew from $87 million on 30 June 2020 to $103 million on 30 June 2021.
Thus, Boston Beer ended the pandemic year with less debt and slightly more cash.
What Value Does Boston Beer Have?
I think Boston Beer (NYSE: SAM) is one of the most overvalued stocks on earth. Mr. Market paid $527.15 for it on 16 September 2021. Yet, Boston Beer had $103 million in cash and short-term investments and $1.561 billion in Total Assets.
Thus, Boston Beer’s value is tiny, and it has almost no cash. Hence, I consider Boston Beer a terrible stock you need to avoid. Mr. Market grossly overvalues SAM, and the company generates small amounts of cash.
I advise investors to drink Samuel Adams; it is a great beer. However, Boston Beer’s stock is terrible. Smart investors will stay as far away from Boston Beer as possible because there is no value at this company.