Will SodaStream Stock Rebound?

SodaStream (NASDAQ: SODA  ) shares are fast approaching five-year lows as continued competitive fears surrounding Coca-Cola (NYSE: KO  ) , Keurig Green Mountain (NASDAQ: GMCR  ) , and other large beverage companies weigh on the stock. This, combined with a lagging U.S. business, has clearly spooked shareholders. However, when you look at SodaStream purely from a valuation and growth perspective, one thing is evident.

The SodaStream problems in focus
SodaStream has been a favorite of shorts for the last three years, but the stock's near 50% loss over the last 12-months has definitely showcased an increase of concern. This is in large part tied to Coca-Cola's decision to enter the at-home soda-making business with partner Keurig. Moreover, SodaStream has been unable to secure a partnership of its own.

Not to mention, SodaStream's first quarter of 2014 showcased real concerns regarding inventories and its distribution channels, as its total revenue rose just 0.5% year over year. This mediocre growth was negatively affected by a staggering 28% decline in the Americas, further amplifying investors' worries.

Not all bad
SodaStream's first quarter was bad, and the Coca-Cola-plus-Keurig partnership is sure to cut into the company's market share. Yet, one key point for investors to remember is that the company still expects considerable growth looking ahead.

Specifically, SodaStream gave guidance for full-year revenue to increase 15% over 2013, which translates to nearly $650 million. While this far lags its near 40% annualized growth rate over the last three years, it does take into consideration the effect of a Coca-Cola market entrance and a more conservative approach.

Yet, the company still expects growth in the Americas, and with Western Europe and Asia/Pacific growing at 17% and 28%, respectively, during the first quarter, both regions remain explosive opportunities for the company.

A signal of value?
SodaStream today may not be the company it was three years ago in terms of growth, but it is still a viable player in the space. For example, its 15% expected growth in 2014 trumps that of Keurig and Coca-Cola at 7.8% and 0.2%, respectively.

In most instances, a company with more bullish growth will trade at a richer valuation premium than its peers. This premium is given due to higher expectations, or the belief that the faster growing company will ultimately grow larger. Therefore, investors look ahead to the future.

Yet, SodaStream trades at less than 15 times forward earnings, which significantly lags Coca-Cola and Keurig at nearly 19 and 31 times next year's earnings, respectively. In other words, SodaStream has double the growth of Keurig and trades at half the valuation, a signal of value to most investors.

The ups and downs of a cycle
In many ways SodaStream today is reminiscent of Keurig back in 2012. Back then Keurig shares had fallen from more than $100 in 2011 to a low of less than $20 in just one year's time due to fears of expiring patents and increased competition. Turns out, the company has survived, and while growth has slowed, the stock still trades at new highs today.

GMCR Chart

Keurig Green Mountain data by YCharts

For SodaStream, it might be in a Keurig-of-2012 moment, one where investors digest the realization that 30% annualized growth is no more and must readjust their expectations. Historically, the market has a tendency to take stocks too high and push them too low at various points over time.

Foolish thoughts
With all things considered, SodaStream may not be at the end of its downtrend, but with solid growth and a cheap stock, there are reasons to believe that it has a brighter future. In other words, we can't predict the day-to-day movement of SodaStream, yet the stock clearly appears to be presenting value for investors.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3025004, ~/Articles/ArticleHandler.aspx, 9/1/2015 12:07:07 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Brian Nichols

Brian Nichols is the author of "5 Simple Steps to Find the Next Top-Performing Stock: How to Identify Investments that Can Double Quickly for Personal Success (2014)" and "Taking Charge With Value Investing (McGraw-Hill, 2013)". Brian is a value investor, but emphasizes psychology in his analysis. Brian studied psychology in undergrad, and uses his experience to find illogical value in the market. Brian covers technology and consumer goods for Motley Fool. Brian also updates all of his new and current positions in his Motley Fool CAPs page. Follow Brian on Twitter and like his page on Facebook for investment conversations and recent stories.

Today's Market

updated 2 hours ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 3:59 PM
GMCR $56.60 Up +2.49 +4.60%
Keurig Green Mount… CAPS Rating: **
KO $39.32 Down -0.13 -0.33%
Coca-Cola CAPS Rating: ****
SODA $15.24 Up +0.33 +2.21%
SodaStream CAPS Rating: **