Over the past six months, Molson Coors’s shares (currently trading at $52.08) have posted a disappointing 5.6% loss, well below the S&P 500’s 4.3% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Molson Coors, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Molson Coors Not Exciting?
Even with the cheaper entry price, we don't have much confidence in Molson Coors. Here are three reasons why you should be careful with TAP and a stock we'd rather own.
1. Demand Slipping as Sales Volumes Decline
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Molson Coors’s average quarterly sales volumes have shrunk by 3.2% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable. 
2. Projected Revenue Growth Shows Limited Upside
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 Molson Coors’s revenue to stall, a slight deceleration versus This projection doesn't excite us and implies its products will see some demand headwinds.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Molson Coors historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.7%, lower than the typical cost of capital (how much it costs to raise money) for consumer staples companies.
Final Judgment
Molson Coors isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 8.1× forward P/E (or $52.08 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
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