Constellation Brands currently trades at $163.67 per share and has shown little upside over the past six months, posting a small loss of 3.7%. The stock also fell short of the S&P 500’s 7.7% gain during that period.
Is now the time to buy Constellation Brands, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Constellation Brands Not Exciting?
We're swiping left on Constellation Brands for now. Here are three reasons we avoid STZ and a stock we'd rather own.
1. Core Business Falling Behind as Organic Growth Slumps
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.
The demand for Constellation Brands’s products has barely risen over the last eight quarters. On average, the company’s organic sales have been flat. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Constellation Brands’s revenue to drop by 3.1%, a decrease from This projection doesn't excite us and suggests its products will see some demand headwinds.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Constellation Brands historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.
Final Judgment
Constellation Brands isn’t a terrible business, but it isn’t one of our picks. With its shares trailing the market in recent months, the stock trades at 13.8× forward P/E (or $163.67 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of Constellation Brands
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