SFI says: Lets explode the BDS myths
From Seeking Alpha
Shares of SODA surge, and there is always a reason for share price outperformance.
Wal-Mart shelf space for SodaStream products is expected to expand meaningfully.
Don’t bother trying to compare SODA’s valuation with other companies.
Since SodaStream’s (SODA) strong showing at the International Home and Housewares (IHH) show, the stock has shown strong signs of strength, rising by more than 11% in roughly 10 trading sessions. On March 17th, which was the first day of trading after the weekend of the IHH show, shares of SODA have surged from $39.77 to a peak of $44.40. This type of move in a market that has been basically flat during the same time period is usually not without its merit. So why the strong performance from shares of SODA, and at quarter’s end, when fund managers usually eliminate some of their losing positions?
First and foremost, SODA’s valuation is fairly cheap when positioned against other companies, growing the time line at nearly 30% last year. The forward-looking multiple on SODA is only 20 times FY14 earnings, based on analysts’ estimates. Any slight outperformance in earnings in the coming quarters puts the stock in an even more value-oriented position for shareholders at recent share price levels. To speak frankly, when has SODA ever really shown the appreciative valuation it has reasonably deserved over the last 3 years. I can probably list the number of companies growing top line at roughly 20% and with a multiple to match on one hand. With that being said, the investing community really doesn’t have a similar business to model SODA after; maybe Keurig Green Mountain (GMCR), but comparing a more needs-based coffee maker company to a lesser needs-based soda maker company isn’t the right comparison either. Martin Costa of Capital Ladder Advisory Group has said many times when answering questions on SODA’s valuation, “If you don’t get the valuation, you ain’t gonna get the valuation, and don’t try to compare it to anything else, because there aren’t any other soda maker companies out there”. Moving on then!