SodaStream

Company Description

SodaStream International Ltd. engages in the development, manufacture, and marketing of home beverage carbonation systems and related products. Its home beverage carbonation systems enable consumers to transform ordinary tap water into carbonated soft drinks and sparkling water. The company sells its products under the SodaStream and Soda-Club brand names through approximately 50,000 retail stores in 42 countries. SodaStream International Ltd. is headquartered in Airport City, Israel.

Five Straight Positive Earnings Surprises

SODA has topped the Zacks Consensus Estimate in each of the last five quarters. The largest of the beats came in the December 2010 quarter. The company reported $0.29, $0.18 or 163% more than the $0.11 estimate.

The next three quarters saw earnings beats that averaged 45% ahead of estimates. The March 2011 quarter saw a significant move in the stock following the 55% earnings beat. The stock moved higher by about 29% following that earnings report.

Stock Moves On Earnings

The last three earnings beats have not translated into big gains for shareholders. The stock traded lower by 30% following the June 2011 earnings report despite the fact the company beat estimates by 29%. A 50% beat in the September 2011 quarter also saw the stock move lower by 3.5%.

Most Recent Beat

The company reported is December 2011 quarter late in February and posted revenue of $86 million, up from $66 million in the year ago period. Earnings per share of $0.26 were 4% ahead of the Zacks Consensus Estimate but down from $0.29 in the same quarter last year.

Estimates Increase

SODA is seeing analysts increase estimates. In January 2012, the Zacks Consensus Estimate for 2012 was $1.81 and has since moved to $1.93. The 2013 estimate moved from $2.38 in January 2012 to the current level of $2.54. That implies earnings growth of 31% for 2013.

Valuation

The valuation for SODA is fairly interesting. A trailing twelve month PE of 25x is a healthy premium to the industry average of 14x. The forward PE of 18x is much more palatable and closer to the industry average of 12.7x. Price to book shows a mild premium while price to sales of 2.35x shows a discount to the 2.43 industry average. What aggressive growth investors will key on is the revenue growth of 35% for the fiscal year that ended in December versus the 5.7% industry average. Also, EPS growth is projected to be 44% for SODA compared to the 10% estimate for the industry.

The Chart

Charts can tell a story of their own. The SODA chart, when limited to the last six months shows a stock that has found support at around $30 and seen highs of $48. The low $30's price implies downside risk of around 10% and upside potential of about 50%. When that chart is backed out to a year, we see that the stock has a great run followed by an even greater fall in the last year. SODA is a Zacks #2 Rank (Buy).

Brian Bolan is an Aggressive Growth Stock Strategist for Zacks.com.

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