Today we’re going to take a look at the well-established Constellation Brands, Inc. (NYSE:STZ). The company’s stock saw significant share price movement during recent months on the NYSE, rising to highs of US$258 and falling to the lows of US$230. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Constellation Brands’ current trading price of US$238 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Constellation Brands’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Constellation Brands
Constellation Brands appears to be expensive according to our price multiple model, which makes a comparison between the company’s price-to-earnings ratio and the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 74.4x is currently well-above the industry average of 25.05x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Constellation Brands’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Constellation Brands’ earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
Are you a shareholder? STZ’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe STZ should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on STZ for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for STZ, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So if you’d like to dive deeper into this stock, it’s crucial to consider any risks it’s facing. For example – Constellation Brands has 5 warning signs we think you should be aware of.
If you are no longer interested in Constellation Brands, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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