Does Ambev Deserve a Place in Your Investment Portfolio?

NYSE: ABEV | Ambev S.A. ADR News, Ratings, and Charts

ABEV – Beer company Ambev (ABEV) reported impressive third-quarter results, and its stock has advanced over the past month. However, the company is expected to suffer from rising input costs. So, let’s evaluate if it is wise to add the stock to one’s portfolio now. Read on.

Based in Sao Paulo, Brazil, Ambev S.A. (ABEV) recently reported impressive third-quarter earnings results, with an 18.5% year-over-year increase in net revenues to R$18.49 billion ($3.35 billion). Its adjusted profit was R$3.75 billion ($679.90 million), representing a 50.4% year-over-year increase as the reopening of bars and restaurants drove sales higher. 

Over the past month, the stock has gained 16.8% in price to close yesterday’s trading session at $3.20.

However, the stock has declined by 0.3% in price over the past three months and is currently trading 19% below its 52-week high of $3.95, which it hit on June 8, 2021. The company also failed to offer guidance for the fourth quarter. Analysts at Bank of America have warned investors about some relevant headwinds projected for 2022. So, ABEV’s near-term prospects look uncertain.

Here is what could influence ABEV’s performance in the upcoming months:

Favorable Analyst Estimates

Analysts expect ABEV’s revenue to increase 8.1% for the quarter ending December 31, 2021, and 12.6% this year. Furthermore, its EPS is expected to grow at a 7.9% rate  per annum over the next five years. In addition, Wall Street analysts expect the stock to hit $3.46 in the near term, indicating a potential 8.1% upside.

High Profitability

In terms of trailing-12-month net income margin, ABEV’s 22.84% is 333.6% higher than the 5.27% industry average. Likewise, its 17.19% trailing-12-month levered FCF margin is 256.2% higher than the 4.83% industry average. Furthermore,  the stock’s 8.73% trailing-12-month CAPEX/Sales is 183.1% higher than the 3.09% industry average.

Market Headwinds

“While the short-term scenario for demand is constructive, we see a deterioration of the consumption environment in 2022 and competition picking up in Brazil, with new capacities coming online in the next few years, while FOREX volatility and high costs should remain headwinds,” according to Bank of America analysts.

Lofty Valuation

In terms of forward P/S, ABEV’s 4.04x is 169.4% higher than the 1.50x industry average. Likewise, its 3.86x forward EV/S is 90.3% higher than the 2.03x industry average. And the stock’s 22.57x and 3.56x  respective forward non-GAAP P/E and P/B are higher than the 20.25x and 3.41x industry averages.

POWR Ratings Reflect Bleak Prospects

ABEV has an overall C rating, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. ABEV has a C grade for Value, which is in sync with its higher-than-industry valuation ratios.

The stock has a D grade for Momentum, which is consistent with its 24.5% price decline over the past three years and 41.6% negative returns over the past five years.

ABEV also has a D grade for Growth. This is justified because its EPS is expected to decline 50% year-over-year to $0.04 for the current quarter, ending December 31, 2021.

ABEV is ranked #17 out of 36 stocks in the Beverages industry. Click here to access ABEV’s ratings for Quality, Sentiment, and Stability as well.

Bottom Line

Even though ABEV reported impressive second-quarter earnings results, its near-term prospects seem uncertain due to expectations that higher commodities prices will keep its financials under pressure in the fourth quarter. Because the stock looks overvalued at the current price level, we think it could be wise to wait for a better entry point.

How Does Ambev (ABEV) Stack Up Against its Peers?

While ABEV has an overall POWR Rating of C, one  might want to consider investing in Beverages stocks with an A (Strong Buy) rating, such as Coca-Cola Consolidated, Inc. (COKE), Compania Cervecerias Unidas, S.A. (CCU), and Coca-Cola Femsa S.A.B. de C.V. ADR (KOF).


ABEV shares were trading at $3.25 per share on Wednesday afternoon, up $0.05 (+1.56%). Year-to-date, ABEV has gained 6.73%, versus a 26.01% rise in the benchmark S&P 500 index during the same period.


About the Author: Nimesh Jaiswal


Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
ABEVGet RatingGet RatingGet Rating
COKEGet RatingGet RatingGet Rating
CCUGet RatingGet RatingGet Rating
KOFGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Stock Market “Nausea Index” Going Off

The stock market (SPY) has seen fresh lows this week scaring many investors into selling their positions. On the other hand, 40 year investment veteran shares a proprietary market indicator that points to a significant bounce coming soon. Is he right? You be the judge by reading below.

:  |  News, Ratings, and Charts

3 Stocks that Are Thriving in an Inflationary Environment

Inflation is one of the biggest threats facing the economy. One profitable strategy during this period of high inflation is to focus on stocks that have pricing power, as these companies’ margins will continue to expand. In contrast, stocks without pricing power are likely to underperform as margin compression erodes EPS. Therefore, investors should consider buying these 3 stocks that are thriving in this inflationary environment: Olin (OLN), Nucor (NUE), and Chemours (CC).

:  |  News, Ratings, and Charts

Is the Bear Market Here?

We are witnessing the nastiest stock market (SPY) correction since Covid first came on the scene. That has some pondering if the next bear market is upon us. 40 year veteran investor Steve Reitmeister gives his clear eyed view on the market outlook and trading plan in this timely commentary. Get the full story below...

:  |  News, Ratings, and Charts

4 Best Value Stocks to Buy in January

In times of high inflation, value stocks tend to outperform growth stocks and have done so over the past year. Amid the rising inflationary pressure and looming interest rate hikes, fundamentally sound value stocks ArcelorMittal (MT), Covestro (COVTY), KT Corporation (KT), and Nature’s Sunshine (NATR) could be solid bets.

:  |  News, Ratings, and Charts

Is the Bear Market Here?

We are witnessing the nastiest stock market (SPY) correction since Covid first came on the scene. That has some pondering if the next bear market is upon us. 40 year veteran investor Steve Reitmeister gives his clear eyed view on the market outlook and trading plan in this timely commentary. Get the full story below...

Read More Stories

More Ambev S.A. ADR (ABEV) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All ABEV News