Shares of SodaStream (NASDAQ:SODA) -- the market leader and innovator in the field of "home carbonation products" -- have tumbled to a six month low below $49 after the company reported third-quarter results that analysts found disappointing. This sell-off has pushed shares down to a P/E below 22, placing SodaStream in a similar valuation territory of slower-growing soda industry giants Coca-Cola (NYSE:KO) and PepsiCo (NASDAQ:PEP). With management maintaining its guidance to increase revenue 30% and net income 23% in 2013, SodaStream may now represent a growth business trading at bargain levels.

Long-term investors are wise to follow Warren Buffett's adage to "be fearful when others are greedy and greedy when others are fearful." The key question is whether SodaStream's downturn over the past six weeks is merely stemming from market jitters or an actual fundamental change in the company's long-term prospects. The more I research SodaStream, the more I am inclined to believe that nothing since the company's third-quarter results has fundamentally changed the business for the worse. 

SodaStream actually beat analyst EPS estimates in the third quarter but missed analyst revenue estimates, recording revenue of $144.6 million compared to average estimates of $145.2 million. Does this narrow revenue miss signify anything that changes the long-term prospects of SodaStream? 

More than a fad?
Like others, I was skeptical whether SodaStream's home-carbonation products were anything more than a passing fad. There are legitimate concerns about whether die-hard Coke and Pepsi drinkers will ever transition to a home-carbonation system to make their own sodas. But SodaStream's sales performance over the past several years helps negate the notion that the company is merely a passing fad.

Since 2009, SodaStream has seen its annual sales more than triple to $436.32 million in 2012. In the first nine months of 2013, revenue has expanded 30% compared to 2012. Not exactly the results I would expect from a fad product. 

SodaStream is also capitalizing on international interest in home-carbonation products. So far this year, SodaStream has seen sales in the Americas increase 53.79% to $145.5 million compared to 2012. Over the same period, Western Europe sales increased 29.22% to $196.85 million. While overall sales have continued to increase at a rate of approximately 30%, SodaStream's sales have lagged in the company's smaller territories such as Asia, Africa, and Central Europe.

Another financial concern arises with SodaStream's irregular operating cash flow production. In 2012, SodaStream produced $37.18 million in operating cash flow following two consecutive years of negative cash flow. So far in 2013, the company has produced negative $16.73 million in cash flow. The irregularity of cash flow has been primarily caused by volatility in working capital (often due to rising inventory levels), an item investors should expect management to level out as the company adjusts to increasing demand. While the cash flow hiccups are an item investors should watch closely, SodaStream holds $29.21 million in cash and has had no long-term debt since 2009.

SodaStream continues to innovate and expand its product line, most recently with a new line of SodaCaps (single-use flavor caps, as opposed to having to measure and pour the flavor syrups for each use). In November 2012, SodaStream entered into an agreement with Cambell Soup (NYSE:CPB), bringing V8 Splash flavors into the mix. SodaStream's market disruption will only increase if it integrates more mainstream brands and flavors into its syrup offerings. 

A bargain compared to the competition
The behemoths of the soda industry, Coca-Cola and PepsiCo, are trading at P/E ratios of 21 and 19.5, respectively. When looking at the most recent quarter on a year-over-year basis, Coca-Cola's revenue decreased 2.5% while earnings grew 5.9%. Pepsi's revenue expanded 1.5% and earnings grew 0.6%. Neither company comes close to SodaStream's sales or earnings growth rates, yet SodaStream is trading at a P/E below 23 -- barely above its comparatively stalwart competitors. 

Foolish bottom line
SodaStream is an innovative company that is slowly disrupting the field of soda and carbonated products. In the words of CEO Daniel Birnbaum, "SodaStream is the 21st century way to enjoy sparkling drinks at home." 

Should the company continue expanding revenue at rates of 25% to 30%, and maintain relatively steady profit margins to ensure comparable earnings growth, it is difficult to see SodaStream shares as anything but undervalued. Despite the renewed pessimism of some analysts, SodaStream's long-term prospects remain very promising, and should aptly reward patient investors.