BOSTON (TheStreet) -- Since it was first featured as an Under the Radar pick at the beginning of January, Boston Beer (SAM) - Get Boston Beer Company, Inc. Class A Report has gained 23%, outperforming the 6.1% advance of the S&P 500 Index. As the company gears up to release its first-quarter results on Wednesday, the future looks just as bright.
Boston Beer makes the highly successful
. and the company is now the largest American-owned brewer after InBev acquired Anheuser-Busch to create
in 2008. Analysts expect the Boston-based company's earnings to more than double to 24 cents per share from 10 cents a year earlier. Revenue is predicted to grow 5.7% in 2010 and 9% in 2011 on the strength of the company's brand.
When the economy sours, worried consumers typically switch to cheaper brands when it comes to discretionary spending. Sales of higher-end brands suffer, hurting their companies' earnings and shares. However, some premium brands have weathered the recession and shares of their owners could soar as the economy recovers.
During the past year, Boston Beer shares have doubled, outperforming American depositary receipts of
, the parent company of the Miller Brewing Company, which has gained 88%. Most people would expect Anheuser-Busch and SABMiller to perform better than Boston Beer during a downturn as consumers reach for lower-priced brands, such as Anheuser-Busch's Natural and SABMiller's Milwaukee's Best.
Even though Boston Beer has its roots in the craft beer space and is priced at a premium to other mass market competitors, that has not stopped its profitability.
Despite the run-up in Boston Beer stock, its forward price-to-earnings ratio of 22.8 is still less than the industry average of 29, suggesting there's still value in the share price.
Trading down is common in rough economic waters, but strong brands that are valued by customers will see less of this negative effect than others. Boston Beer is blessed by a strong balance sheet that sports no debt and a loyal customer base. Expect its solid performance to continue as the rebound lifts the stock higher. We rate the stock "buy."
-- Reported by David MacDougall in Boston.
Prior to joining TheStreet Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.