1 Growth Stock Down 8% to Buy Right Now

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This could be a great time to consider adding Constellation Brands (STZ 0.81%) to your portfolio. The alcoholic beverage stock beat the market in 2022 but still ended the year down about 8% compared to the 19% decline in the S&P 500.

In a fresh earnings announcement in early January, the owner of hit beer brands like Modelo and Corona showed a few good reasons why the business is poised to generate strong growth and earnings results over the next few years. Read on for a few of the factors that make this growth stock such a compelling buy right now after its modest drop over the last year.

Market share wins

Constellation Brands is winning market share in a huge, growing industry. Its core beer division, anchored by premium import brands like Modelo and Pacifico, was the top market share gainer for the sixth straight quarter in Q3.

The company performs especially well in the premium part of the market, having captured an additional 2.3 percentage points of market share in that niche this past quarter thanks to success in brands like Modelo Especial. Overall, depletions, a measure of sales to consumers, were up 6% for the selling period that ran through late November. Constellation Brand hiked both its sales and earnings outlook following that strong performance.

Financial progress

The company’s financial wins also make it a more attractive stock. Sure, profitability is down slightly thanks to soaring costs on inputs, labor, and transportation. But the company is still generating strong earnings, with operating income landing at $747 million in Q3 compared to $840 million a year ago. A big factor in that decline is the wine and spirts business, which is being restructured and is progressing toward positive earnings growth for the full year.

Constellation Brands is also generating ample free cash flow, allowing the company to beat its earlier goal of returning $5 billion to shareholders through stock repurchases and a growing dividend payment. These returns aren’t coming at the expense of management’s growth initiatives, either, as the company is pouring cash into its brewery upgrades.

Looking ahead

Management hiked several of its outlook metrics for the fiscal year, including sales, earnings, and cash flow efficiency. Constellation’s cost cuts are yielding better results than executives had hoped, which means it might not be long before the company returns to its prior path of steady sales and profit growth following a step backward in fiscal 2023.

Wall Street has responded to a lot of this good news by keeping the stock’s returns well above the broader market in 2022. But there could be much more outperformance ahead.

Constellation Brands has a dominant position in this consumer staples category, which tends to do well even through economic contractions. Its sparkling finances give the company flexibility to continue investing in the business while still returning cash to shareholders.

Depending on your preference, you might wait for the stock to fall further before adding it to your portfolio. But when it comes to owning successful, well-capitalized growth stocks like this, there’s no time like the present.