Tastes they are a changin’. For several years now major soda companies have seen declining sales in developed markets as consumers turn to healthy, natural options. The duopoly of The Coca-Cola Company (NYSE: KO) and PepsiCo, Inc. (NASDAQ: PEP) have turned to water and health drinks to maintain sales.
These three micro-cap beverage companies are powering sales by delivering healthy, natural, and flavorful options to their customers. Let’s open a cold Kombucha and talk about quenching our thirst for returns.
Celsius Holdings, Inc. (NASDAQ: CELH) sports a market cap of $238M and is the largest of the three. The Celsius story can be summed up in their marketing statement, which is printed on their drink cans: “healthy energy, accelerated metabolism, burns body fat.” And, consumers are buying the story hand-over-fist.
Annual sales growth has risen over 34% per year the past five years, and year-over-year quarterly growth topped 100% last quarter. The fitness message, that the company’s drinks are a “thermogenic” that increases metabolism, is definitely resonating.
Celsius’ stock has been trading in a range between $4 and $6 this year. With the stock currently trading near the $4 support level now may be a good time to initiate a position.
New Age Beverages Corporation (NASDAQ: NBEV) sells a line of products ranging from coconut water to Kombucha. The company has recently signed several distribution deals, and rolled out a new cold brew coffee line as part of its recent acquisition of the Marley beverage portfolio. The Jamaican cold brew has 50% less sugar than other cold brews, making it an easier sell.
New Age has been growing sales the past few years at a very fast 127% and is projected to grow earnings next year over 280%, producing positive earnings for the first time. The stock currently trades at $1.97, just slightly over its book value of $1.40 per share. The stock traded over $4 earlier this year.
With long term debt to equity at only .08, the company is in good financial condition, and can afford financing to further expand its brands. This combination of financial flexibility and rapidly growing sales could give investors a healthy return at these levels.
Reed’s, Inc. (REED) has recently rallied off of multi-year lows as the company attempts a turnaround play. For the past few years the stock has lived up to the Dark ‘n’ Stormy moniker for the cocktail enjoyed with Reed’s famous ginger beer.
The company has been pushing the natural ingredients used in its products, especially ginger, which has been found to have several health benefits. They have also recently introduced a new line of soda with no sugar, all natural ingredients marketed under their Virgil’s soda brand.
The company recently grew earnings quarter-over-quarter by 54%, but needs to continue the momentum. The company kicked off its restructuring with a new CEO and management, and recent quarterly returns look promising. If management can make a no sugar soda taste as good as they claim, investors may be able to afford a few more Dark ‘n’ Stormy’s.
These three beverage plays, two growing rapidly and one in the early innings of a turnaround play, could all deliver nice returns in short order. As August heats up, you can enjoy a cold beverage and support your most recent portfolio addition at the same time.
Disclaimer: The author and Spotlight Growth has no positions in any of the stocks mentioned in this article. Nor does either party currently have any relationship, or any other conflicts of interest, with any of the companies mentioned in this article. This content is meant for informational and entertainment purposes only and should not be meant as a recommendation to buy or sell any securities. Please visit a licensed financial representative to determine what investments are right for you.
Article By: Steven Adams