Celsius Holdings (CELH 1.72%) is a relative upstart in the field of energy drinks, but its line of products is fast catching on -- and so is the stock. In fact investors would struggle to find better shares to have owned in the last five years than Celsius, which has put up a ridiculous return of 4,100%.
That's astronomically higher than the S&P 500 or the Nasdaq Composite. And the shares have crushed the market so far in 2023, up 76%. These outstanding gains wouldn't be possible without some strong fundamental performance underlying the business. In fact, Celsius is one of the fastest-growing companies our there today.
Let's take a closer look at why you should consider buying the beverage stock now.
Posting triple-digit gains
Celsius' revenue is on a roll. In the second quarter, sales increased 112% year over year to $326 million, crushing consensus analyst estimates. That might surprise some investors, but this is essentially business as usual for Celsius, which posted sales growth of 140% and 108%, respectively, in 2021 and 2022. Between 2017 and 2022, the company's revenue also rose by more than 18-fold.
That's impressive in its own right, but what's really remarkable is that Celsius is profitable, growing net income by 345% last quarter compared to Q2 2023. This was driven by a higher gross margin due to "lower package and raw material unit cost, reduced product waste/scrap, and improved inbound and outbound freight efficiency."
It shouldn't be a shock that Celsius is relentlessly and rapidly stealing market share in the energy drink industry. Credit has to go to the company's distribution capabilities, boosted recently by a partnership with PepsiCo. Pepsi took a $550 million equity stake in Celsius about a year ago and is its distribution partner both in the U.S. and internationally.
Raising the brand's awareness by getting the popular functional energy drinks into more retail locations is the name of the game for Celsius, something this relationship can certainly help achieve.
Moreover, Celsius is becoming more popular on Amazon, boasting an 18.6% share of the energy drink category. That's behind only Monster Beverage, which has a 20.8% share. Amazon had 2.8 billion visits to its site in the month of July. So, gaining greater exposure on a massive e-commerce platform like that can be a game-changer for Celsius by making it even more accessible and convenient for customers to make a purchase.
Analysts see Celsius posting 87% revenue growth and a 120% jump in diluted earnings per share (EPS) in the current quarter on a year-over-year basis. Despite ongoing macroeconomic uncertainty, the outlook is very bullish for the consumer-facing brand. And by 2025, the consensus view from Wall Street is that the business will generate $2.4 billion in sales and $4.01 in diluted EPS, significantly higher than last year's totals.
Shares aren't cheap
Along with the stock's popularity today is a rich valuation. Celsius' forward price-to-earnings (P/E) ratio is 105, a massive premium to chief rival Monster, which trades at a multiple of 38. And Celsius is much more expensive than the forward P/E of 28 for the Nasdaq-100 Index.
At first glance, that's definitely not a cheap price for investors to pay. After all, a lower valuation can boost investor returns, if all else is equal. But if investors have confidence that Celsius can continue its incredible growth in the years ahead, then perhaps the steep valuation might be well worth it.
Celsius far exceeded analyst expectations in the most recent quarter. More positive surprises like that going forward can do wonders for the stock price, which should please shareholders.
