This article is part of our Rising Stars Portfolio series.
My Rising Stars portfolio embraces companies that pursue sustainable business practices, renewable resources, and social responsibility. Carbonated drinks might not seem like a natural fit with these lofty ideals, but one company I'm watching might manage to cater to consumers' collective sweet tooth while still making the world a sweeter place.
Environmentally aware consumers already know about the evils of wastefulness and the particular perils of plastic. Shareholder activist As You Sow recently urged giants Coke
SodaStream sounds like an exciting stock idea. Still, I'm haunted by another upstart soft drink play that disappointed investors' fizzy expectations. Jones Soda once enjoyed major cool cred -- but topped out at nearly $30 in April 2007. Now it's just a sad penny stock. Hansen Natural
It's cheeky and bold to go for a hefty piece of the market dominated by beverage giants like Coke, Pepsi, and Dr. Pepper/Snapple
SodaStream trades at a nosebleed 74 times trailing earnings. By comparison, Pepsi's trading at just 19 times earnings, and Coke's price-to-earnings ratio is a measly 13. If SodaStream's current popularity and growth potential simply reflect just another passing fad, investors who buy in now have a lot to lose.
Bottom line: SodaStream's on my watch list because of its business's compelling elements, including its urge to save the world from plastic bottles. But for now, I'm staying on the sidelines. As long as the price is this fizzy, this stock is risky. Share your thoughts in the comments box below.
- Look deeper into SodaStream shares' recent pop.
- Will selling through Best Buy give SodaStream a jolt?
- Add SodaStream to your Fool watchlist.
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The Motley Fool owns shares of Coca-Cola and PepsiCo. Motley Fool newsletter services have recommended buying shares of Hansen Natural, Coca-Cola, SodaStream International, and PepsiCo. Motley Fool newsletter services have recommended creating a diagonal call position in PepsiCo. Try any of our Foolish newsletter services free for 30 days.
Alyce Lomax does not own shares of any of the companies mentioned in her personal portfolio. For more on this and other topics, check back at Fool.com, or follow her on Twitter: @AlyceLomax. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.