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Many investors seemed to perceive SodaStream's (NASDAQ: SODA ) fourth-quarter results as being like yesterday's soft drink gone flat, but bargain hunters should take a look at this exciting, low-priced growth stock.
Nothing soft about this soda strategy
The Israeli-based maker of do-it-yourself soda machines actually posted impressive quarterly numbers despite those who fretted over profit margins and other concerns. Total sales surged 55%, and net income jumped 42% to $7.5 million.
Obviously, the holiday season was very good for SodaStream. Post-holiday, SodaStream continues to ink great partnerships that prove it's a contender and should boost future growth. It's partnered with Samsung to build SodaStream machines into refrigerators, so consumers can have a consolidated appliance for making their own bubbly water or soda.
SodaStream is also working on changing the perception that its syrups simply peddle more fizzy "sugar water" and flow into health concerns. The company just recently partnered with Ocean Spray to add to its portfolio of "better for you" options for DIY carbonated drinks. The juice maker will offer syrups for cranberry juice and other flavors with added SodaStream sparkle.
According to the press release about the partnership, 30% of Ocean Spray consumers already mix their juice with sparkling water. Using SodaStream to do so makes the process a whole lot easier.
SodaStream is also taking a poke at energy drinks makers like Monster Beverage (NASDAQ: MNST ) in its licensing partnership with eBoost, which makes natural energy drinks, as Monster has tried to fight off pressure about possible health concerns associated with its drinks. SodaStream and eBoost will couch their beverages as responsible drinks in an otherwise irresponsible category. Ouch.
Responsible and green
SodaStream is one of the stocks I purchased for the real-money Prosocial Portfolio I manage for Fool.com. I consider it a socially responsible company because it lessens environmental impact by allowing consumers to forgo bottles and cans and make their own sparkling beverages at home.
This is a major potential catalyst as more people take waste and carbon footprints into account when they make their purchasing decisions. Even beyond the environmental argument, SodaStream syrups and carbonating canisters are way cheaper and more convenient than cases and cases of soda.
Although SodaStream's emergence actually threatens another of my Prosocial Portfolio stocks, PepsiCo (NYSE: PEP ) , Pepsi differs from other soda rivals like Coke and Dr Pepper Snapple because it isn't reliant on beverage sales. The majority of Pepsi's revenue comes from other brands, including Quaker Oats and Frito-Lay products.
Decreased soft-drink volume sales reported by the soda giants indicate that consumers are turning away from traditional soft drinks. Health concerns, increased interest in energy drinks or other beverages, or name-brand sodas' high prices may be causing the trend, but regardless, people appear to be turning to other thirst-quenching options.
Even better, SodaStream's Super Bowl spot communicated its existence to viewers -- and its ad emphasized its environmental friendliness, too, making conventional rivals' bottles and cans look like repositories of wastefulness. Fast Company actually revealed SodaStream's Super Bowl ad you didn't see, because CBS didn't want to step on big supporters' Coke and Pepsi's toes.
A sparkling opportunity
When stock moves don't make sense, or investor sentiment doesn't match reality, we find the best opportunities to buy. SodaStream currently trades at a PEG ratio of 0.62, signaling an undervalued stock. Coke, Pepsi, and Dr Pepper Snapple all sport far higher PEG ratios right now, hovering at about 2.0.
SodaStream's growth story hasn't reached its conclusion. If you're searching for a cheap stock that can capitalize on consumer trends, SodaStream looks very refreshing.
SodaStream's carbonation technology sounds simple, right? Well, this razor-and-blade company offers an intriguing opportunity for growth that may be harder to duplicate than you might think. Our premium report on SodaStream explains the opportunities as well as the risks in the company. The report comes with a year's worth of updates, so just click here to get started.