Craft Brewer Watchlist: Craft Brew Alliance Inc (BREW), Boston Beer Co Inc (SAM)

Boston Beer Co Inc (NYSE:SAM) is a different story. Despite its top line growth of 12% YoY, Boston Beer Co Inc (NYSE:SAM) is a much more developed company. The company’s main brand, Samuel Adams, has been a hit for many years along the US east and west coasts and has tremendous brand equity value. With a market capitalization of $1.9 billion and an enterprise value (EV) of $1.8 billion, the company sits on the deal sweet spot of any major brewery looking to complete an acquisition. Besides, its 19% EBITDA margin, leaves a lot of room for improvement to the potential buyer. Of course the market acknowledges all this and, according to my estimates, SAM trades at 2013 14x EV/EBITDA. Is it there any room for appreciation if an M&A deal is around the corner? I bet the answer is yes but its not going to be significant. Again, time is not a free commodity in this world.

Craft Brew Alliance Inc (NASDAQ:BREW) and Boston Beer Co Inc (NYSE:SAM) are both clear M&A target candidates in a cash rich industry that is always consolidating itself. They both offer a lot of room for margin improvement, but they are also fairly valued and they don’t pay any cash dividend. I would keep them in my watch list just in case Mr. Market offers them at a deep discount at some point in time. My view would be “stay out until the opportunity comes along.”

The article Craft Brewer Watchlist originally appeared on Fool.com and is written by Federico Zaldua.

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