3 Reasons to Buy SodaStream

If you're thirsting for a cheap stock that's poised for growth, here are three reasons to buy SodaStream International (Nasdaq: SODA  ) .

Cheap, green, and easy: SodaStream's DIY carbonated-drink makers can take a heck of a lot of waste out of our shared space. SodaStream says it offers an "Active Green" product, meaning that consumers can actively reduce their carbon footprints every time they use its machines to make soda or sparkling water at home.

Although Americans are getting better about recycling than decades ago, we still have a lot of room for improvement; plenty of recoverable refuse like plastic bottles still ends up in landfills. According to the EPA, in 2010 Americans managed an overall 34.1% recycling rate, but only 13% of plastic bottles (like those ubiquitous plastic water and soda bottles) were recycled. SodaStream's product takes the cases of containers out of the equation.

SodaStream boasts that consumers no longer have to lug heavy bottles and cans from the store or separate the empties for recycling, and its machine doesn't use batteries, plumbing, or electricity. SodaStream also pitches that its users only pay about a quarter for the equivalent of one can of soda or one liter of sparkling water.

Sparkling sass: It takes a pretty spunky company to take on beverage giants like Coca-Cola (NYSE: KO  ) and Pepsi (NYSE: PEP  ) . In fact, SodaStream's setting its competitive sights on such companies with its marketing campaign, "The Cage," which is set up in 30 displays worldwide. "The Cage" is filled with bottles and cans picked out of trash sites, and its banner reads: "1 Family. 5 Years. 10,657 Bottles and Cans."

Coke, for one, wants out of "The Cage" and has threatened SodaStream with legal action in an attempt to get the company to stop using Coke's bottles in its marketing. This adds up to an interesting argument, since somebody went dumpster diving to retrieve consumers' throwaways. At some point, trash is trash, whether it ends up in a landfill or reused in a thought-provoking campaign.

A refreshing bargain: SodaStream shares are currently very undervalued. SodaStream trades at 14 times forward earnings. Coke trades at 18 times forward earnings, and Pepsi has a forward price-to-earnings ratio of 16. Dr. Pepper Snapple (NYSE: DPS  ) trades at forward 14 times earnings. Then there's Monster Beverage (Nasdaq: MNST  ) , with its monstrous forward P/E of 29.

SodaStream trades at a lower forward price-to-earnings ratio than those other beverage companies, and it has a better shot at much larger growth since the U.S. market is a big one to tap. Along those lines, SodaStream's PEG ratio of 0.58 signals an extremely undervalued stock compared to growth expectations.

I recently called out three reasons to sell Monster, and bought shares of SodaStream for the real-money portfolio I'm managing for Fool.com. A company that's willing to aggressively take on the likes of Coke -- and point out how it can save consumers money, energy, and needless waste -- shows some great indicators of potential growth in a changing world. SodaStream looks like it can add some sparkle to any portfolio.

If you're looking for more stock ideas, check out our special report "3 American Companies Set to Dominate the World." Click the link and obtain your copy free of charge.

Alyce Lomax does not own shares of any of the companies mentioned in her personal portfolio. The Motley Fool owns shares of Coca-Cola, PepsiCo, and SodaStream International. Motley Fool newsletter services have recommended buying shares of Coca-Cola, Monster Beverage, SodaStream International, and PepsiCo. Motley Fool newsletter services have recommended creating a diagonal call position in PepsiCo. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (3) | Recommend This Article (4)

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  • Report this Comment On July 17, 2012, at 4:02 PM, jennyswave25 wrote:

    I really like the idea of SodaStream and reducing the world's carbon footprint by eliminating all of the plastic bottles and cans clogging up landfills. However, I don't drink soda and bottled water enough to make purchasing a soda-maker worth it. Call me lazy too, but I can't see myself "making" soda when I want something quickly; and I'm not so sure the American public will use it long enough for it to pass "fad" status. Oh, and I'm one gadget away from my kitchen resembling a landfill. ( I hope you prove me wrong though. The world could use more green products like this.)

  • Report this Comment On July 18, 2012, at 9:31 AM, seattle1115 wrote:

    It's what my dad calls a "closet appliance." You receive one (probably as a gift; only rarely does anyone buy the thing for him- or herself), and it gathers dust on the counter for a while before it eventually ends up in its final resting place - the hallway closet. That's where the people who bought it for you will find it, years from now, when they come to help get the house ready to sell after you've died.

  • Report this Comment On July 18, 2012, at 11:37 AM, RallyCry wrote:

    Seattle, you clearly haven't tried it out or you'd be singing a different tune. Maybe in this case you shouldn't take your dad's word for it. It takes literally 30 seconds to make. Also its cheaper than cans or bottles and tastes better. Have the nerve and take the plunge. Hopefully then the only thing that will be collecting dust is your gadget mentality toward SodaStream.

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