Boston Beer's Valuation Too Foamy

U.S. consumers' appetite for craft beer has been insatiable over the past decade. Despite overall industry headwinds, the volume of craft beer sold in the United States has grown at a 12% compound annual growth rate, mitigating a 1.3% annual fall in noncraft liters. The biggest losers in this craft revolution have been the major domestic brewers, particularly Anheuser-Busch InBev (BUD) and MillerCoors (SBMRY)/(TAP), which have seen sales of traditional mainstream and light beers fall precipitously (nearly 1.7% annually over the past decade) as consumer preferences have dramatically shifted.

Conversely,  Boston Beer (SAM)--maker of the largest craft beer, Samuel Adams--has enjoyed a 12.5% volume CAGR over the same period and an even stronger 15.3% revenue CAGR as a result of consumers' willingness to pay up for nonmainstream brands, both in beer and alternative flavors (such as the company's 2011 relaunch into the fast-growing hard cider business with Angry Orchard). Shareholders have benefited as well; Boston Beer's stock has increased at a nearly 30% rate annually since early 2004, compared with a 6.5% yearly gain in the S&P 500.