Anheuser-Busch InBev NV (ADR) (BUD), Molson Coors Brewing Company (TAP): A Rally Is on Tap for This Brewer

Of course, the great rotation from bland beer to craft beer will take decades before upsetting companies like Molson Coors. Boston Beer Co Inc (NYSE:SAM), the largest craft brewer in the United States, has a 1% share of the domestic market; craft beer represents just 6.5% of all beer sales in the United States. Clearly, craft brewers have a long way to go before they start encroaching on Molson Coors Brewing Company (NYSE:TAP)’ profitability, which means the two may exist peaceably side-by-side for years to come.

Investment case

As with most stocks, Molson Coors has rocketed upward in price over the last several months. At the end of February, the stock traded just below $45; the stock now trades above $53 per share, or 18% higher than at the end of February.

Despite the run-up, Molson Coors Brewing Company (NYSE:TAP) trades at just 12 times trailing four quarters free cash flow. Although the company is not growing quickly, it will likely grow at least as quickly as the broader economy over the next several years. As a result, investors who buy at 12 times free cash flow will likely receive a double-digit annualized return over a long holding period.

The article A Rally Is on Tap for This Brewer originally appeared on Fool.com and is written by Ted Cooper.

Ted Cooper has no position in any stocks mentioned. The Motley Fool recommends Boston Beer and Molson Coors Brewing Company. The Motley Fool owns shares of Boston Beer. Ted is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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