Constellation Brands currently trades at $166.78 per share and has shown little upside over the past six months, posting a small loss of 3.3%. The stock also fell short of the S&P 500’s 5% gain during that period.

Is there a buying opportunity in Constellation Brands, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Constellation Brands Not Exciting?

We're sitting this one out for now. Here are three reasons why you should be careful with STZ and a stock we'd rather own.

1. Slow Organic Growth Suggests Waning Demand In Core Business

When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.

The demand for Constellation Brands’s products has generally risen over the last two years but lagged behind the broader sector. On average, the company’s organic sales have grown by 2.8% year on year.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Constellation Brands’s revenue to drop by 6.8%, a decrease from This projection doesn't excite us and suggests its products will see some demand headwinds.

3. Shrinking Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Analyzing the trend in its profitability, Constellation Brands’s operating margin decreased by 31.8 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 1.3%.

Final Judgment

Constellation Brands isn’t a terrible business, but it doesn’t pass our quality test. With its shares underperforming the market lately, the stock trades at 12.9× forward P/E (or $166.78 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now. We’d suggest looking at one of our all-time favorite software stocks.

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