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The Investment That Refreshes
03/01/2013 7:45 am EST
Greg Pugh of Investing Daily says this stock is “fizzing” with potential...and it's not Coke, or Pepsi, or anything on your grocery shelf.
While these soda giants have created vast distribution networks and bottling enterprises, SodaStream International (SODA) may have the most compelling alternative to the long-enduring bottled soda products.
SodaStream is an Israeli maker of in-home soda machines. The system includes a soda maker, a CO2 carbonator, a reusable bottle, and over 150 flavor options. The consumer fills the bottle with water, adds CO2 to make the bubbles, and then adds syrup concentrate to make the final flavored beverage. The carbonation machines turn ordinary tap water into sparkling water, teas, and sodas.
The costs of SodaStream’s machines are between $80 and $200, with additional sales of carbonation kits and drink flavors. SodaStream’s products are available on the company’s Web site and at leading retailers.
SodaStream has an impressive outlook, solid fundamentals, and innovative products that are the growth drivers for this stock. The company’s products are environmentally friendly, cost-effective, promote health and wellness, and are customizable and fun to use. In addition, its products offer convenience by eliminating the need to carry bottles home from the supermarket, to store bottles at home, or to regularly dispose of empty bottles.
We believe the stock has bright prospects ahead, due to solid demand for its products, strategic partnerships, enhanced marketing techniques, product innovations, accretive acquisitions, and successful strategic investments. Recently, SodaStream signed a licensing agreement with Campbell Soup (CPB) to add Campbell’s V8 Splash and V8 V-Fusion brands to the SodaStream home beverage carbonation system.
SodaStream has topped earnings estimates for eight straight quarters, and is expected to report another solid performance late next month, owing to strong third-quarter results.
From 2008 to 2011, the firm’s earnings skyrocketed from 4 cents a share to $1.62 a share. Over the same period, sales have more than doubled to $289 million from $139 million.
SodaStream has a market capitalization of $1.03 billion and trades with a price-to-earnings (P/E) ratio of 26. However, SodaStream is a high-growth company that warrants a high P/E, as the company has a current price to growth ratio (PEG) of 0.86, compared to the industry average of 1.38. The potential long-term earnings growth rate for the stock is 30.4%.
SodaStream’s third-quarter earnings of 80 cents per share beat the consensus estimate by 17.7% and last year’s result by 66.7%. Revenue of $112.5 million also increased 48.7% year-over-year, on the back of strong performances in both of the product categories (soda makers and consumables) and in all four geographic regions.
First Call analysts’ consensus have projected 2013 earnings per share (EPS) of $2.74, which is 28% higher than 2012. For 2014, SodaStream has a consensus EPS of $2.96, an increase of 8% from 2013.
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