Constellation Brands (STZ) Marked As A Barbarian At The Gate
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.
Trade-Ideas LLC identified
(
) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Constellation Brands as such a stock due to the following factors:
- STZ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $93.8 million.
- STZ has traded 794,891 shares today.
- STZ traded in a range 206.4% of the normal price range with a price range of $3.54.
- STZ traded above its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).
Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.
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More details on STZ:
Constellation Brands, Inc., together with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. The company sells wine across various categories, including table wine, sparkling wine, and dessert wine. STZ has a PE ratio of 29.4. Currently there are 5 analysts that rate Constellation Brands a buy, 1 analyst rates it a sell, and 2 rate it a hold.
The average volume for Constellation Brands has been 1.2 million shares per day over the past 30 days. Constellation has a market cap of $19.4 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.85 and a short float of 1.8% with 3.46 days to cover. Shares are up 13% year-to-date as of the close of trading on Friday.
Analysis:
rates Constellation Brands as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in net income, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
Highlights from the ratings report include:
- STZ's revenue growth has slightly outpaced the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 6.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 45.52% is the gross profit margin for CONSTELLATION BRANDS which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.41% is above that of the industry average.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Beverages industry average, but is less than that of the S&P 500. The net income increased by 5.3% when compared to the same quarter one year prior, going from $211.00 million to $222.20 million.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.58% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- CONSTELLATION BRANDS's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CONSTELLATION BRANDS increased its bottom line by earning $9.87 versus $2.06 in the prior year. For the next year, the market is expecting a contraction of 55.9% in earnings ($4.35 versus $9.87).
- You can view the full Constellation Brands Ratings Report.
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