Constellation Brands Inc. (NYSE:STZ)

The analysis of the quarterly financial ratios reveals distinct trends and fluctuations in valuation metrics over the observed periods.

Price to Earnings (P/E) Ratio

The P/E ratio started relatively high in mid-2017, around 23, and showed a declining trend reaching a low near 9 by late 2018, indicating increasing earnings relative to price or valuation compression. This was followed by a rise, spiking dramatically to over 48 in mid-2019 and even higher to a notable outlier of 644 in early 2020. After this anomaly, it declined again to a range between 22 to 35 through much of 2021, with further spikes hitting 410 and 380 in late 2022. This pattern suggests volatile market expectations or earnings performance during these intervals, with several periods of extreme market valuation changes.

Price to Operating Profit (P/OP) Ratio

This ratio exhibited moderate volatility but stayed within a tighter range compared to the P/E ratio. Initially fluctuating between 15.6 to 19.1 until early 2018, it then showed a decrease to low double digits near 11.6 by late 2018. Subsequently, it stabilized around 15 to 20 with occasional dips to approximately 13 to 14 toward late 2022. The trend indicates somewhat stable market valuation relative to operating profitability but with periods of minor valuation compression and expansion.

Price to Sales (P/S) Ratio

The P/S ratio was relatively stable throughout, ranging broadly between 3.5 and 5.7. A noticeable decline was observed around early 2019, reaching lows near 3.5, followed by recovery to above 5 in parts of 2021 and 2022. This stability suggests a consistent market valuation relative to sales, with temporary adjustments potentially linked to changes in revenue expectations or market conditions.

Price to Book Value (P/BV) Ratio

The P/BV ratio demonstrated a downward trend from above 5 in 2017 to around 2.5 in late 2018, indicating either an increase in book value or a decrease in market capitalization. In the following years, the ratio rose modestly to values around 3.5 to 4.5, with some fluctuations but no extreme volatility. This points to a moderate recovery or stabilization in equity market valuation relative to book value.

In summary, the data shows distinct volatility in market valuation multiples, particularly the P/E ratio, which had periods of extraordinary spikes that may reflect either earnings anomalies or market speculation. The P/OP and P/S ratios were comparatively more stable, suggesting steadier valuation relative to operating profit and sales. The P/BV ratio declined significantly before stabilizing, indicating changing perceptions or realities of net asset value over this time frame. Overall, the trends point to periods of market uncertainty interspersed with stabilization phases across multiple valuation dimensions.

The financial data reveals several notable trends in the share price, earnings per share (EPS), and price-to-earnings (P/E) ratio over the analyzed periods.

Share Price

The share price demonstrated a general upward trend from May 31, 2017, reaching a peak around August 31, 2018. Subsequently, there was a marked decline towards February 29, 2020, coinciding with the onset of the global pandemic. Following this low point, the share price recovered significantly, peaking again in late 2021, before experiencing a moderate decline towards the end of 2022. Overall, the share price shows sensitivity to broader market and economic conditions, with periods of recovery post-downturns.

Earnings per Share (EPS)

EPS followed a somewhat volatile pattern over the observed timeframe. Initially, EPS increased steadily until mid-2018, suggesting improved profitability. However, a sharp decline is noticeable around early 2020, with some negative EPS values recorded, likely reflecting pandemic-related impacts on earnings. Thereafter, there was a recovery in EPS through 2020 and early 2021, though it did not reach previous highs consistently and showed fluctuations with occasional negative values in late 2021 and early 2022. This volatility indicates challenges in maintaining consistent profitability.

Price-to-Earnings (P/E) Ratio

The P/E ratio exhibited significant variability, reflective of both changes in share price and EPS. Notably, extremely high P/E ratios are observed when EPS values were near zero or negative, particularly around early 2020 and late 2022, suggesting that share prices were high relative to earnings during these periods of earnings weakness. Conversely, lower P/E ratios occurred in periods of stronger earnings performance and moderate share prices, such as mid-2018. This pattern underscores fluctuations in market valuation relative to earnings, with pronounced spikes during earnings downturns.

In summary, the company experienced a period of growth in share price and earnings through 2018, followed by volatility influenced heavily by external market conditions in 2020. Although there was a rebound in share price and earnings post-2020, consistency remained elusive with fluctuating EPS and volatile P/E ratios, reflecting underlying profitability challenges and investor sentiment shifts throughout the periods examined.

The analysis of the quarterly financial data reveals distinct trends in share price, operating profit per share, and the price to operating profit ratio over the examined periods.

Share Price

The share price experienced fluctuations throughout the quarters. Initially, it showed a general upward trend, reaching a peak near November 2017 and February 2018. Subsequently, the price declined significantly around November 2018, followed by a recovery that peaked again in February 2021. After this peak, the share price demonstrated volatility but maintained relatively high levels compared to the earlier periods, with some decline observed towards the last recorded quarter.

Operating Profit Per Share

Operating profit per share displays relative stability with modest variations during most quarters. It peaked notably in February and May of 2021 as well as in the quarters of 2022. There was a slight dip during late 2019 through early 2020, coinciding with a lower share price. Following this, the operating profit per share showed a consistent increase, reaching its highest values towards the end of the dataset.

Price to Operating Profit (P/OP) Ratio

The P/OP ratio reflects market valuation relative to operating profitability and fluctuates more markedly. It started moderately, then declined sharply near November 2018, indicating a relative undervaluation or decreased market confidence. Afterward, the ratio rose significantly, peaking in the early quarters of 2022, suggesting increased market expectations or valuation premiums despite stable operating profits. Toward the end of the period, the ratio decreased indicating a possible market correction or adjustment to the more recent profit levels.

Overall, the data suggest that while operating profit per share remained fairly stable with gradual improvement, the share price and related valuation multiples experienced higher volatility. This pattern indicates market dynamics possibly driven by external factors, investor sentiment, or strategic developments affecting the company’s perceived value beyond operating performance.

Share Price Trends

The share price exhibits notable volatility over the period analyzed. Starting at $192.79, it rises steadily, peaking at $228.26 in early 2018. Subsequently, there is a pronounced decline to approximately $150.94 by the end of 2018, followed by a recovery to around $196.94 in mid-2019. Another decline occurs, reaching a low of $153.02 in early 2020, likely influenced by broader market conditions during that period. From mid-2020 onward, the share price demonstrates a general upward trend, hitting a peak of $254.21 in early 2022 before declining somewhat towards late 2022, ending near $208.68.

Sales per Share Development

Sales per share show a consistent upward trajectory with minor fluctuations. Starting at $37.86 in mid-2017, sales per share grow steadily to $42.41 by early 2018 and gradually increase to $43.27 by early 2020. Despite minor decreases during some quarters, the general pattern remains positive, culminating in a peak of $51.79 by late 2022. This reflects ongoing revenue growth on a per-share basis throughout the period.

Price-to-Sales Ratio (P/S) Dynamics

The P/S ratio follows a fluctuating pattern reflective of share price volatility relative to sales growth. Initially around 5.09, it peaks at 5.76 in early 2018 before plunging to 3.54 at the end of 2018, coinciding with a sharp drop in share price. The P/S recovers to above 5.00 in early 2021, mirroring the share price recovery, then fluctuates downwards towards 4.03 by late 2022. These changes indicate that market valuation relative to sales experienced periods of compression and expansion, aligning with broader market trends and company-specific performance.

Overall Observations

The data reflects a growth in fundamental sales metrics accompanied by significant share price volatility, impacting valuation multiples as captured by the P/S ratio. The company’s sales per share sustain a positive growth path, suggesting expanding business fundamentals. However, market sentiment, external factors, and possible sector-specific challenges contribute to pronounced fluctuations in share price and valuation ratios. The recent trend towards stabilization in P/S around the mid-four range despite higher sales per share suggests market recalibration of growth expectations or risk assessments.

Share Price Trend

The share price exhibited considerable fluctuations over the observed period. Initially, there was a gradual increase from approximately $193 to a peak near $228 within the first year. Subsequently, the price experienced a notable dip, descending to around $150 at one point, before recovering above $185. A significant rise occurred towards late 2020 and early 2021, reaching highs above $238. However, the price demonstrated volatility thereafter, with a downward movement to around $209 by late 2022.

Book Value per Share (BVPS) Trend

The book value per share showed a generally upward trend from just under $38 up to a peak near $70 during early 2021. This indicates an increase in net asset value per share over time. Following this apex, BVPS declined steadily to approximately $45 by late 2022, suggesting some erosion in net assets or changes in equity structure during the latter part of the period.

Price-to-Book (P/BV) Ratio Dynamics

The P/BV ratio started above 5.0, indicative of a high market valuation relative to book value. This ratio decreased significantly to a low near 2.4 in early 2020, reflecting a substantial reduction in market price relative to book value despite book value growth. Subsequently, the ratio increased again, fluctuating mainly between 3.0 and 4.6, with a peak above 4.5 in late 2022, signaling a stronger market valuation in relation to accounting book value amidst declining BVPS in that period.

Overall Insights

The data portrays a cycle of growth in fundamental net asset value followed by a contraction, while market valuation showed marked volatility not always aligned proportionally with changes in book value. The pronounced decline in share price during late 2018 and early 2020 contrasts with generally increasing BVPS during those times, suggesting market concerns beyond asset base considerations. The rebound in share price alongside an increasing P/BV ratio after early 2020 may reflect renewed investor confidence or external factors increasing the firm's market appeal. Finally, the falling BVPS coupled with rising P/BV ratio towards the end of the period warrants further investigation into underlying causes such as asset write-downs, share repurchases, or changes in capital structure.