Today, it’s time to look back and ahead at one of the best performing stocks in the Stocks Under $20 portfolio. That stock is Craft Brew Alliance (BREW), the company behind such beer brands as Widmer, Redhook, and Kona. The company is a small player in a large market, but has good business goals to drive it forward. Shares are up 52% since my recommendation and aren’t done rising just yet.

Craft Brew Alliance recently held an investor presentation to announce its 2015 plans. Among the key items was a list of 6 core advantages no other company offers:

• Distinctive portfolio of pioneering brands
• Expertise in branding
• National brewing and supply chain capability
• Scale to drive national retail chain activation
• Allied access to the Anheuser Busch distribution network
• Seasoned management team

Among the highlights of the presentation were:

• Redhook adding a seasonal beer called Seedy Blonde Apple Ale
• Hired CMO Ken Kunze, who has 25 years beverage experience, was most recently the CMO at Heineken USA, was responsible for well known “Most Interesting Man” advertising campaign for Dos Equis.
• Key sponsorships with the University of Washington and Seattle Sounders
• New regional beesr ECS No Equal Blonde, False Start Session IPA
• Launching a new targeted media campaign in spring of 2015 for Redhook ESB
• At Widmer, Upheaval IPA is the fifth fastest growing IPA in the USA
• Will introduce Hefe Shandy for Widmer in 2015
• Kona’s recent “Dear Mainland” advertising campaign saw a 37% increase in sales volume in targeted ad markets.
• Partnership with Keep Calm and Chive On continues to be beneficial. 20,000 locations in 50 states carry the KCCO Black Lager. A new KCCO gold lager will be launched in six packs beginning February 2015. A regional KCCO White Wheat was released in Texas
• Omission is the number one gluten free beer brand in the USA, has seen 100% segment growth. Goal for 2015 is continued focus on distribution.
• Key goal for 2015 is to build on can business, specifically Kona into 16oz cans.
• Key goal for 2015 to get Omission into restaurants

The Omission brand continues to be one of the key pieces of growth going forward. When other large brewers were late to the gluten free beer game, Craft Brew built the Omission brand and established itself as a leader. Sales of the brand are up 47% and growth is coming in 2015 with new partnerships with the IronMan and Crossfit brands. The company’s goal of getting Omission into restaurants will also continue to drive sales as the gluten free market is expected to hit $15 billion by 2015.

In the recent second quarter (end 06/30), Craft Brew Alliance saw net sales increase 16%. Total beer shipments increased 13% in the second quarter. Gross margins improved 230 basis points to 32.8%. Earnings per share grew to $0.10, from the $0.06 posted in the prior year. Total sales for the quarter were $60.7 million. Over the first six months, sales stand at $107.7 million.

Samuel Adams (SAM) is the ultimate craft brewer and most recognizable of the names in the United States. The success of the brand and company has also made some happy investors who followed SAM from its early trading days.

Now, Craft Brew Alliance does not have the same scale and revenue levels as Samuel Adams, but for simple comparison value here is a look at the two companies.

As you can see, Craft Brew has a market capitalization almost 10 times smaller than Samuel Adams. This comes despite the fact that Craft Brew does over one fifth the sales of the larger rival. Craft Brew shares trade with a price to sales half the level of Samuel Adams. Analysts expect Craft Brew to post a profit of $0.25 in the current fiscal year and $0.35 in fiscal 2015. This comes after a small profit of $0.13 in fiscal 2013.

Now do I believe that Craft Brew should trade at 3.2 times its projected sales? Absolutely not. However, the company with double digit revenue growth could realistically trade at 2.0 times sales. I believe shares are undervalued by at least 25%.

The next potential catalyst for Craft Brew Alliance is third quarter earnings, which will be presented sometime between November 4^th and 10^th. Analysts expect a profit of $0.11 for the quarter and revenue growth of 9.5% to $54 million. I believe this number will be met with the strong marketing associated throughout the year of the Kona brand and the anniversary celebration of Widmer. Look for shares to see a nice rise on the heels of earnings. Investors might want to consider going long prior to this report.

Take a look at all the highlights and goals for 2015. Those items are reasons why this stock is a continued winner. Also mix in the company’s key relationship with Buffalo Wild Wings, which I pointed out years ago. The company continues to expand its brands regionally, into cans, into new stores, and throughout restaurants. This stock is a solid bet on growth in craft beer, gluten free beer, and distribution gains going forward.

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