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Celsius Stock Crash: Is This a Buying Opportunity?
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Celsius ((CELH - Free Report) ) has been one of the hottest beverage stocks in recent years, driven by its strong brand presence in the energy drink market and rapid revenue growth. However, after a very significant rally over the past several years, the stock has taken a hard hit, plunging nearly 70% in the last three months. While this decline has been painful for current shareholders, it has brought the stock back down to a more palatable valuation after its previous levels were arguably overinflated.
In the analysis that follows, I'll break down the fundamentals of Celsius Holdings to determine if and when it might make sense for investors to start accumulating shares again. Additionally, I'll compare CELH to other beverage companies to assess its position in the industry and see if it still stands out as a growth opportunity at its current price.
In the performance chart below, we see that even after the recent selloff Celsius stock has put up incredible returns over the last five years, compounding at 91% annually. However, we can see that the returns have fallen from 7,800% down to 2,500%. Additionally, if we zoom in on the chart, the three-year performance is much less impressive and is essentially flat over that period.
Image Source: Zacks Investment Research
Celsius Shares Trade Below Historical Median Valuation
As noted, this selloff has brought Celsius’ business valuation back in line with reality and the stock now trades near its lowest relative value in the last five years. At 4.8x forward sales the company is trading well below its five-year median of 9.9x and even below the broad market average of 5.4x.
Profits have also meaningfully inflected higher over the last two years as well after years of negative earnings. Today, Celsius has a one-year forward earnings multiple of 26.4x, which is in line with the most mature companies in the beverage industry.
Furthermore, Celsius is projecting strong earnings growth in the coming years, with analysts expecting earnings per share (EPS) to climb 24.1% annually over the next three to five years. This gives CELH a PEG ratio just above 1, making it fairly priced when discounted for growth.
Image Source: Zacks Investment Research
Monster Beverage and the Broader Industry
The beverage industry has been highlighted in recent years for its powerful business model and exceptional returns from the leading stocks of the industry. Well known now are the long-term compounded returns of Coca-Cola ((KO - Free Report) ), PepsiCo ((PEP - Free Report) ) and Monster Beverage ((MNST - Free Report) ), which have minted numerous millionaires over the years.
Monster Beverage returns are especially notable as can be seen in the performance chart below. In the last twenty years, the stock is up nearly 20,000% or a 30% annual return over that time. Like fellow beverage giants Coca-Cola and PepsiCo, growth at Monster Beverage is slowing considerably and though it is likely to remain a good stock in the future, huge outperformance may not be in the cards. Alternatively, based on growth forecasts, Celsius stock should continue to outperform, making it a more appealing option for those seeking growth returns.
Image Source: Zacks Investment Research
Below, we can see the growth forecasts for Monster Beverage, which show reasonable, but not extraordinary growth forecasts. At these levels, Monster Beverage is forecasting similar growth expectations to Coca-Cola and Pepsi. This growth is nothing to scoff at and when paired with little capital expenditures, a solid balance sheet and stock buybacks investors can expect very steady long-term returns.
However, for investors seeking more than just steady returns, Celsius may be a better bet. Celsius is expecting sales growth in the high teens and EPS growth in the mid to high 20s. Furthermore, Monster Beverage, with a forward earnings multiple of 29.1x is trading at a premium to Celsius.
Image Source: Zacks Investment Research
Is Celsius Stock a Buy?
Celsius remains a fast-growing, asset-light business, and recent price declines have brought the stock to levels appealing to prudent investors. Its current valuation is well below its historical median and better reflects the potential long-term cash flows.
Investors who buy now should see future profits. However, the stock is still in a steep decline, and further selling may offer more attractive buying opportunities. Consider opening a small position now or waiting for the price action to stabilize and for earnings revisions to trend higher, as CELH currently holds a Zacks Rank #4 (Sell).
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Celsius Stock Crash: Is This a Buying Opportunity?
Celsius ((CELH - Free Report) ) has been one of the hottest beverage stocks in recent years, driven by its strong brand presence in the energy drink market and rapid revenue growth. However, after a very significant rally over the past several years, the stock has taken a hard hit, plunging nearly 70% in the last three months. While this decline has been painful for current shareholders, it has brought the stock back down to a more palatable valuation after its previous levels were arguably overinflated.
In the analysis that follows, I'll break down the fundamentals of Celsius Holdings to determine if and when it might make sense for investors to start accumulating shares again. Additionally, I'll compare CELH to other beverage companies to assess its position in the industry and see if it still stands out as a growth opportunity at its current price.
In the performance chart below, we see that even after the recent selloff Celsius stock has put up incredible returns over the last five years, compounding at 91% annually. However, we can see that the returns have fallen from 7,800% down to 2,500%. Additionally, if we zoom in on the chart, the three-year performance is much less impressive and is essentially flat over that period.
Image Source: Zacks Investment Research
Celsius Shares Trade Below Historical Median Valuation
As noted, this selloff has brought Celsius’ business valuation back in line with reality and the stock now trades near its lowest relative value in the last five years. At 4.8x forward sales the company is trading well below its five-year median of 9.9x and even below the broad market average of 5.4x.
Profits have also meaningfully inflected higher over the last two years as well after years of negative earnings. Today, Celsius has a one-year forward earnings multiple of 26.4x, which is in line with the most mature companies in the beverage industry.
Furthermore, Celsius is projecting strong earnings growth in the coming years, with analysts expecting earnings per share (EPS) to climb 24.1% annually over the next three to five years. This gives CELH a PEG ratio just above 1, making it fairly priced when discounted for growth.
Image Source: Zacks Investment Research
Monster Beverage and the Broader Industry
The beverage industry has been highlighted in recent years for its powerful business model and exceptional returns from the leading stocks of the industry. Well known now are the long-term compounded returns of Coca-Cola ((KO - Free Report) ), PepsiCo ((PEP - Free Report) ) and Monster Beverage ((MNST - Free Report) ), which have minted numerous millionaires over the years.
Monster Beverage returns are especially notable as can be seen in the performance chart below. In the last twenty years, the stock is up nearly 20,000% or a 30% annual return over that time. Like fellow beverage giants Coca-Cola and PepsiCo, growth at Monster Beverage is slowing considerably and though it is likely to remain a good stock in the future, huge outperformance may not be in the cards. Alternatively, based on growth forecasts, Celsius stock should continue to outperform, making it a more appealing option for those seeking growth returns.
Image Source: Zacks Investment Research
Below, we can see the growth forecasts for Monster Beverage, which show reasonable, but not extraordinary growth forecasts. At these levels, Monster Beverage is forecasting similar growth expectations to Coca-Cola and Pepsi. This growth is nothing to scoff at and when paired with little capital expenditures, a solid balance sheet and stock buybacks investors can expect very steady long-term returns.
However, for investors seeking more than just steady returns, Celsius may be a better bet. Celsius is expecting sales growth in the high teens and EPS growth in the mid to high 20s. Furthermore, Monster Beverage, with a forward earnings multiple of 29.1x is trading at a premium to Celsius.
Image Source: Zacks Investment Research
Is Celsius Stock a Buy?
Celsius remains a fast-growing, asset-light business, and recent price declines have brought the stock to levels appealing to prudent investors. Its current valuation is well below its historical median and better reflects the potential long-term cash flows.
Investors who buy now should see future profits. However, the stock is still in a steep decline, and further selling may offer more attractive buying opportunities. Consider opening a small position now or waiting for the price action to stabilize and for earnings revisions to trend higher, as CELH currently holds a Zacks Rank #4 (Sell).