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Peter Lynch Guru Analysis for Constellation Brands Inc

STZ 
$91.54
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2.13
2.38%
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Exchange: NYSE
Industry: Consumer Non-Durables
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Assessments & Analysis Based on October 30, 2014 close price: $89.41

  for the P/E/Growth Investor based on the criteria of Peter Lynch. Return to STZ Guru Analysis

All Star Guru Scorecard

Source Go Chart %
Peter Lynch 56%
Benjamin Graham 29%
Validea 64%
Motley Fool 35%
David Dreman 43%
Martin Zweig 46%
Kenneth Fisher 48%
James P. O'Shaughnessy 40%



Detailed Analysis

Guru Score: 56%


Determine the Classification:

This methodology would consider STZ a "fast-grower".


P/E/Growth Ratio: [PASS]

The investor should examine the P/E (25.17) relative to the growth rate (85.42%), Based on the average of the 3 and 4 year historical EPS growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for STZ (0.29) is very favorable.


SALES AND P/E RATIO: [PASS]

For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. STZ, whose sales are $5,864.6 million, needs to have a P/E below 40 to pass this criterion. STZ's P/E of (25.17) is considered acceptable.


Inventory To Sales: [PASS]

When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for STZ was 52.96% last year, while for this year it is 35.82%. Since inventory to sales has decreased from last year by -17.14%, STZ passes this test.


EPS Growth Rate: [FAIL]

This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for STZ is 85.4%, Based on the average of the 3 and 4 year historical EPS growth rates, which is considered too fast.


Total Debt/Equity Ratio:


FREE CASH FLOW: [NEUTRAL]

The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for STZ (3.05%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.


NET CASH POSITION: [NEUTRAL]

Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for STZ (0.3%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.

 
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