Constellation Brands: Don't Fall In The Value Trap At $150

Core Viewpoint - Constellation Brands has experienced a significant stock decline of 32% in 2023, underperforming the S&P 500, which has risen by 9% due to lowered sales and earnings forecasts linked to decreased demand for its beers among the Hispanic community in the U.S. [2][3] Financial Performance - Constellation Brands' revenues have decreased significantly in recent years, with a 0.5% decline from $10 billion over the last 12 months, contrasting with a 5.1% growth for the S&P 500 [6] - The company holds a price-to-sales (P/S) ratio of 2.7 compared to 3.3 for the S&P 500, and a price-to-free cash flow (P/FCF) ratio of 12.9 versus 21.0 for the S&P 500 [6] - Operating income over the last four quarters amounted to $3.2 billion, with an operating margin of 31.7%, while net income registered at -$442 million, indicating a net income margin of -4.4% [12] Profitability and Financial Stability - Profit margins for Constellation Brands are approximately at the median level for companies within the Trefis coverage universe, but the balance sheet appears fragile [7][8] - The company has a debt of $12 billion against a market capitalization of $27 billion, resulting in a debt-to-equity ratio of 43.2%, which is higher than the S&P 500's 20.5% [12] Resilience in Downturns - STZ stock has shown slightly worse performance than the S&P 500 during recent downturns, indicating moderate resilience [9][10] - The overall assessment of Constellation Brands across key performance indicators shows weaknesses, reflected in its current low valuation, with growth rated as very weak, profitability as moderate, financial stability as weak, and downturn resilience as moderate [13]