Author: Eric Steiman
Covestor model: Undervalued Opportunities
Disclosure: Long SODA
Global investors have beaten down SodaStream International (SODA) from its all-time highs of around $80 dollars per share. The stock is currently trading in the mid-30s. The company has continued to beat Wall Street’s estimates in each of the past five quarters. However, the shorts have gained control of the stock and have not relented. A few things that could change the game are around the corner.
My biggest takeaway from last quarter’s conference call was that the company will start to report earnings per share in U.S. dollars (instead of euros) starting in the first quarter of 2012. From the surface this shouldn’t amount to much, but when you look at the company’s financial ratios on most financial sites, it’s showing incorrect data.
On most sites, the 2012 EPS estimate are for 1.61 euros, instead of $2.10. Based on a current price of 35.62, the trailing Price/Earning’s (P/E) ratio is a paltry 16.9! 2013 EPS estimates are for 1.96 euros, instead of $2.55, giving the company an even smaller 13.96 forward P/E. For a growth company, I believe this is an attractive valuation.
When you typically see companies trading at P/Es this low, they are considered value stocks with minimal growth prospects. Fortunately, that’s not the case with Sodastream, which projected 2012 EPS growth of more than 40%, with revenues increasing 30%-plus. The US continues to be the biggest market for growth and from all reports continues to add retailers to the distribution channel.
William Blair and Company had a note in mid-April that highlighted the possibility of a Wal-Mart (WMT) deal, which may help SodaStream make further gains in the U.S. market. Globally the company continues to expand, and has recently gained traction in Japan, as well as its continued dominance across Europe.
I’m eagerly awaiting the first quarter earnings release, as I feel that analysts and investors are miscalculating the EPS for 2012 and 2013. I can’t wait to see how those holding 10 million shares short react after the next quarterly release. It’s worth the wait.