Whether or not investors should consider buying a “round” or the rebound in a stock like Molson Coors (NYSE: TAP) is an interesting question to dive into. As investors can see from the chart below, it’s been a bumpy few months for the alcoholic beverage maker.
That said, I also think this dip may be one worth buying. Let’s take the bullish side of the argument on Molson Coors and see why this is a stock that may be poised for a rebound in the months and years to come.
Valuation matters
As far as blue-chip companies with valuations one might consider to be attractive, Molson Coors does appear to me to fit the description of an “undervalued stock” or value stock as most investors would refer to a company with a price-to-earnings ratio around nine times.
That’s dirt cheap for a company that sells what many investors would call a staple (even though there is some discretionary element to beer, especially when compared to other alcoholic beverages in this space). Yes, there is competition, and Millennials are drinking far less beer than their Baby Boomer parents did.
But it’s also true that at the company’s current valuation multiple, it’s hard to argue these future headwinds aren’t baked into Molson Coors’s stock price right now. That’s an attractive setup for value investors looking to pick up a stock to ride for a decade or two from here.
Can growth pick up?
I think the biggest question around Molson Coors, for those considering buying the stock, is whether the company can return to meaningful growth over the medium term. Indeed, without such growth (either via margin expansion or volume growth, preferably both), the investing thesis may be blown on this name.
That said, I like the innovative move the Molson Coors team has been making, in edging into the non-alcoholic beer market and bringing on a number of new products that have seen traction. While young drinkers are staying away from traditional beer brands, the move into more niche segments of this market (which can carry higher margins) may be a more attractive setup for those thinking long term.
I think at Molson Coors’s current valuation, with the quality of its management team and new product launches, this is a stock I’d feel fairly comfortable legging into here. For value investors looking for a dollar cost averaging opportunity, I think now is the time for a deep dive on this particular stock.
