Value
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.4 |
| P/S | 8.6 |
| EV/EBITDA | 5.9 |
| Fwd P/E | 9.1 |
| PEG | 3.9 |
| Analyst target | 6.0 |
- ▸Forward P/E: 11.1x
- ▸PEG: 2.61
STZ · Why this verdict
Why Constellation Brands (STZ) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.6/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue declined 11% year-over-year, earning a growth score of 0, suggesting the beer and spirits portfolio is facing meaningful volume or pricing pressure that could undermine the earnings quality narrative if the trend continues. Growth breakdown | Revenue growth turns positive, reaching at least 2% year-over-year growth, within the next 12 months following the current decline cycle. | →Stable |
| CounterRevenue declines in beverage companies are often the result of portfolio pruning or brand repositioning; if lower-margin products are shed in favor of higher-margin brands, revenue can decline while earnings grow. | ||
Constellation Brands beat earnings estimates in 3 of the last 4 quarters with an average surprise of 6.1% and generates 121% free cash flow relative to net income, demonstrating that reported earnings understate actual cash generation. Quality breakdown | Free cash flow conversion remains above 100% of net income over the next 12 months, confirming that cash generation is a structural feature of the business. | →Stable |
| CounterFree cash flow above 100% of net income can reflect working capital timing rather than structural conversion; a single quarter of elevated inventory or receivables can temporarily suppress cash flow in subsequent periods. | ||
An earnings report is approximately 14 days away and the company has beaten 3 of the last 4 quarters, creating a near-term potential catalyst that is already partially flagged as an edge in the data. Catalyst breakdown | The upcoming earnings results exceed analyst estimates by at least 3%, consistent with the recent average surprise of 6.1%. | →Stable |
| CounterThe one miss in the last 4 quarters came with a 2.3% shortfall; a miss in the near-term earnings report could reset sentiment given the stock's already-limited upside to analyst targets. | ||
A debt-to-equity ratio of 1.3 triggers a leverage penalty in the scoring, limiting financial flexibility and increasing the sensitivity of earnings to interest rate changes in an environment where the company's revenue is declining. Bear case | Debt-to-equity falls below 1.0 within 12 months through debt repayment funded by free cash flow, reducing leverage risk. | →Stable |
| CounterA debt-to-equity of 1.3 is moderate for a beverage company with stable cash flows and strong free cash flow conversion; many investment-grade consumer staples companies operate comfortably at higher leverage. | ||
Revenue declined 11% year-over-year, earning a growth score of 0, suggesting the beer and spirits portfolio is facing meaningful volume or pricing pressure that could undermine the earnings quality narrative if the trend continues.
→StableGrowth breakdown
- Expectation
- Revenue growth turns positive, reaching at least 2% year-over-year growth, within the next 12 months following the current decline cycle.
CounterRevenue declines in beverage companies are often the result of portfolio pruning or brand repositioning; if lower-margin products are shed in favor of higher-margin brands, revenue can decline while earnings grow.
Constellation Brands beat earnings estimates in 3 of the last 4 quarters with an average surprise of 6.1% and generates 121% free cash flow relative to net income, demonstrating that reported earnings understate actual cash generation.
→StableQuality breakdown
- Expectation
- Free cash flow conversion remains above 100% of net income over the next 12 months, confirming that cash generation is a structural feature of the business.
CounterFree cash flow above 100% of net income can reflect working capital timing rather than structural conversion; a single quarter of elevated inventory or receivables can temporarily suppress cash flow in subsequent periods.
An earnings report is approximately 14 days away and the company has beaten 3 of the last 4 quarters, creating a near-term potential catalyst that is already partially flagged as an edge in the data.
→StableCatalyst breakdown
- Expectation
- The upcoming earnings results exceed analyst estimates by at least 3%, consistent with the recent average surprise of 6.1%.
CounterThe one miss in the last 4 quarters came with a 2.3% shortfall; a miss in the near-term earnings report could reset sentiment given the stock's already-limited upside to analyst targets.
A debt-to-equity ratio of 1.3 triggers a leverage penalty in the scoring, limiting financial flexibility and increasing the sensitivity of earnings to interest rate changes in an environment where the company's revenue is declining.
→StableBear case
- Expectation
- Debt-to-equity falls below 1.0 within 12 months through debt repayment funded by free cash flow, reducing leverage risk.
CounterA debt-to-equity of 1.3 is moderate for a beverage company with stable cash flows and strong free cash flow conversion; many investment-grade consumer staples companies operate comfortably at higher leverage.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Constellation Brands has beaten earnings estimates in 3 of the last 4 quarters with an average 6.1% upside surprise and generates 121% free cash flow conversion relative to net income, but revenue declined 11% year-over-year and the stock carries elevated debt with a debt-to-equity ratio of 1.3.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 7.9 |
| ROA | 5.7 |
| Gross margin | 6.5 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 3.7 |
| FCF quality | 9.0 |
| Moat | 5.8 |
| Piotroski F | 6.7 |
- ▸Strong margins: 20%
- ▸Excellent cash conversion: 121% FCF/NI
Growth
4.9/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 1.7 |
| EPS growth | 8.1 |
- ▸Declining revenue: -3%
Momentum
1.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 1.0 |
| Volume | 2.9 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -1.4%/30d — confirmed downtrend
Sentiment
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 5.7 |
| Analyst rating | 7.5 |
| Price target | 8.4 |
- ▸Analyst upside: 27%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Negligible insider selling — $939,089 (0.004% of mkt cap)
Peer rank
3.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.0 |
| quality rank | 8.7 |
| growth rank | 1.3 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 8.3 |
| support resistance | 8.1 |
| 52w position | 5.8 |
Risk (lower is worse)
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.5 |
| days to cover | 7.3 |
| volatility | 3.8 |
| put call | 0.0 |
| implied vol | 6.2 |
| beta | 10.0 |
| debt equity | 4.5 |
| news risk | 5.5 |
- ▸Elevated put/call: 2.31
- ▸Concentration risks: 3 MED (10-K Item 1A)
Catalyst
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 7.6 |
| dividend safety | 7.0 |
| news activity | 8.0 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 300.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- ASYMMETRY:2.0>=1.5
- INSIDER:OK
- NEWS_BOOST:ANALYST:0.50
- EARNINGS_PROXIMITY:94d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- MOMENTUM:1.9<4.5
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
2.05
Upside
+14.3%
Downside
7.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.1 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Technical at 7.4) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:1.9<4.5) reinforce the read. Current asymmetry R:R is 2.05 — supplementary context, not the trigger for this path.
The strongest dimensions are Technical at 7.4, Quality at 7.3, and Sentiment at 7.2; the weakest are Momentum at 1.9, Peer rank at 3.5, and Growth at 4.9. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 2.05 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Earnings Beat And Fcf Quality
Trip ifFree cash flow conversion falls below 80% of net income, dropping more than 40 percentage points from the current 121% level.
- P2Revenue Decline Growth Risk
Trip ifRevenue declines by more than 15% year-over-year in any single quarter, deepening beyond the current 11% decline rate.
- P3Near Term Earnings Catalyst
Trip ifUpcoming earnings miss by more than 5%, with actual EPS falling below 95% of the analyst consensus estimate.
- P4Debt Leverage Constraint
Trip ifDebt-to-equity ratio rises above 1.8, increasing more than 38% above the current 1.3 level.