Sector financial performance:

This company, who is a craft brewing company, has been grouped into craft sector of beer industry.

The sector had been growing before 2016 as consumers’ taste shifted to better beers with higher quality and better taste while the whole beer industry, especially premium beer sector, has been declining. Sales of companies in this sector decreased in 2016/2017 , as indicated by decrease in volume (about 6% annually ) while increasing unit price ( about 1.5-2.5% annually), and started a rebounding in 2018.

Because unit price continued to increase, companies’ margins seem to have generally been improved while decreased sales. However, increase in price/increased margin was partially offset by gradually increasing production, labor, and packaging costs since 2017. Therefore, in current situation where demand seems to be rebounding, we have seen a general improvement in profitability among companies in this sector in the past year. The average gross margin is currently about 42% and operating margin down to 7%.

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Company performance:

Demand for products of this company seems to have been decreasing since 2015 due probably to very strong competition from tremendous new craft beer companies who just entered into this sector. The decrease has been reflected by decrease in shipment when unit price kept rising. The decrease trend in volume seems to still be continuing while it rebounded in 2018.

For the third quarter of fiscal 2018 compared with same period of 2017(20180930)

Sales from comparable distribution channels decreased 7.6% due to decrease of 7% in shipment.

For the first nine months of fiscal 2018 compared with same period of 2017(20180930)

Sales from comparable distribution channels increased 2.6% due to increase of 0.5% in shipment and increase of 2% in price.

For fiscal 2017 compared with 2016

Sales from comparable distribution channels decreased 1.9% due to decrease of 5.6% in shipment offset by increase of 3.5% in price.

For fiscal 2016 compared with 2015

Sales from comparable distribution channels decreased 5.4% due to decrease of 8% in shipment offset by increase of 2.8% in price.

For fiscal 2015 compared with 2014

Sales from comparable distribution channels increased 0.7% due to increase of 2.4% in unit price offset by decrease of 1.7% in shipment.

Due to continuingly increasing unit price, we have seen that its gross margin increased to about 33% and operating margin to about 4% in 2018 while its production costs increased as well during this period of time.

Both net income and cash inflow demonstrated negative growth between 2016 and 2017 but increased positively in 2018 when its sales volume stopped declining.

Stock price

Our price/sales relativity of valuation methods and analysis indicate that this stock is currently relatively overvalued by the market with an enterprise price/EBI ratio of 59 ($16). The concern is its uncertainty in sales growth.