A lot of consumer-facing growth stocks are pretty flat these days, but one that's standing out with notable gains is Celsius Holdings (CELH 0.94%). Shares of the the distributor of functional energy beverages are trading closer to their highs than their 52-week lows. Celsius stock is up 136% since bottoming out in May, a wealth-altering 17-bagger over the past five years.

Why is Celsius sparkling at a time when other flavored beverage makers are standing still? Let's dive into what makes this company different, why it's delivered enormous gains, and why this growth story is still in the early chapters. 

People at a fitness center doing a group workout.

Image source: Getty Images.

Get fizzy with it

Celsius does have a distinctive product. Its growing line of flavored carbonated beverages helps folks with active lifestyles burn calories by improving their near-term metabolism rates. Can other players come close to matching its proprietary MetaPlus blend that kicks up the thermogenesis -- or heat creation -- process that accelerates a drinker's metabolism? Sure, but branding matters more than might in this space.

Red Bull and Monster (MNST 0.84%) dominated the first wave of energy drinks. Coca-Cola (KO 0.95%) and PepsiCo (PEP 0.36%) tried to make a dent in the nascent beverage market with their own entries in the booming niche. It didn't work. Money, marketing muscle, and shelf space weren't enough. This could be why PepsiCo decided to invest $550 million in Celsius this summer in exchange for an 8.5% stake in the form of convertible preferred stock, a seat on the board, and rights to be its primary distribution partner in the U.S. and its preferred partner overseas. 

PepsiCo didn't have to think hard before making this shrewd strategic move. Celsius' growth has been stellar, accelerating in recent years. 

  • 2019: 43% revenue growth.
  • 2020: 74% revenue growth.
  • 2021: 140% revenue growth.

The top line is up 150% through the first six months of this year. PepsiCo is working through another year of single-digit growth, just as it has in 9 of the past 10 years. Its investment in Celsius won't move the needle given PepsiCo's enterprise value of $258 billion. It doesn't have to. Just being associated with a rapidly ascending winner saves it from the embarrassment of failing on its own. Coca-Cola made a similar move when it spent more than $2 billion for a minority stake in Monster. 

Monster was further ahead in its growth cycle at the time of the Coca-Cola deal, and it has still gone on to beat the market by nearly quadrupling in value over that time. Monster was a generational wealth creator as one of the market's best-performing growth stocks before that. There's big money to be made if you bet on the right bubbly. Celsius could fare even better, especially with PepsiCo giving Celsius the global push that it lacked before. International sales accounted for just 6% of revenue in its latest quarter. 

Margins could use some improving at Celsius, but the bottom line is still impressive. Net income soared 12-fold in its latest quarter, the third time in a row that it has sailed past Wall Street's profit targets. 

Celsius has come a long way from the days when it was selling largely at gyms and fitness centers. Its cans are now readily available at supermarkets, mass market retailers, and convenience stores.

The stock isn't cheap. When Wedbush analyst Gerald Pascarelli initiated coverage of Celsius Holdings with a neutral rating earlier this week, he conceded that it's the best growth story among beverage stocks and the entire consumer packaged goods category that he covers. The rub is that trading at a revenue multiple that is seven times its enterprise value also makes it the most expensive. But Celsius has earned its market premium, making it a market-thumping winner.