Should Constellation Brands (NYSE:STZ) Be Disappointed With Their 50% Profit?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But Constellation Brands, Inc. (NYSE:STZ) has fallen short of that second goal, with a share price rise of 50% over five years, which is below the market return. The last year has been disappointing, with the stock price down 6.5% in that time.” data-reactid=”28″>If you buy and hold a stock for many years, you’d hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But Constellation Brands, Inc. (NYSE:STZ) has fallen short of that second goal, with a share price rise of 50% over five years, which is below the market return. The last year has been disappointing, with the stock price down 6.5% in that time.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=" Check out our latest analysis for Constellation Brands ” data-reactid=”29″>Check out our latest analysis for Constellation Brands

While Constellation Brands made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Constellation Brands saw its revenue grow at 6.0% per year. Put simply, that growth rate fails to impress. It’s probably fair to say that the modest growth is reflected in the modest share price gain of 8.5% per year. If profitability is likely in the near term, then this might be one to add to your watchlist.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

More

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Constellation Brands is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts” data-reactid=”49″>Constellation Brands is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Constellation Brands the TSR over the last 5 years was 60%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!” data-reactid=”51″>When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Constellation Brands the TSR over the last 5 years was 60%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Investors in Constellation Brands had a tough year, with a total loss of 4.9% (including dividends), against a market gain of about 19%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 9.9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Constellation Brands better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Constellation Brands you should know about.” data-reactid=”53″>Investors in Constellation Brands had a tough year, with a total loss of 4.9% (including dividends), against a market gain of about 19%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 9.9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Constellation Brands better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Constellation Brands you should know about.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Of course Constellation Brands may not be the best stock to buy. So you may wish to see this free collection of growth stocks.” data-reactid=”54″>Of course Constellation Brands may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.” data-reactid=”55″>Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.