A Threat To Big Soda?

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SodaStream International (NASDAQ:SODA) is a stock that I wrote about several months ago. The company is a manufacturer of home beverage carbonation systems, which transforms water into soft drinks/sparkling water.

Making sodas at home? It's cheaper, it's more convenient, and it's better for the planet.

Gee, could this company be a threat to big soda such as Coca-Cola (NYSE:KO), Pepsi (NYSE:PEP), Dr. Pepper (NYSE:DPS), etc? I think it is! I have used the product for a couple of years now and I really like it.

I have a SodaStream system here at my office and I have one at home. It just seems that whenever you're really feeling like having a nice cold soda, it seems to always be that you're out!

Next comes the trip to the grocer, standing in line, lugging the bottles home and waiting for them to get cold.

But if you have a SodaStream system in your home and/or office, you can choose your degree of carbonation and syrup based on your preference. SodaStream has dozens of popular flavors both regular and diet, and they are adding new flavors all the time.

SodaStream is currently a $1.45 billion dollar company, and it's really starting to take off again.

Data from Best Stocks Now App

Let's first take a look first at the performance of the stock. SodaStream first went public in 2010 at about $25 dollars per share. Today it's at about $70 dollars per share. Not a bad IPO-take that Facebook (NASDAQ:FB)!

The stock is up 120% in the last 12 months! The stock gets an "A+" momentum grade right now as it's one of the hottest, strongest stocks in the market.

Data from Best Stocks Now App

SodaStream obviously does not have a three, five, or ten year average yet. It is a work in progress.

When I wrote my book Best Stocks Now! a few years ago, one of the stocks that I featured was Green Mountain Coffee (NASDAQ:GMCR), because it had a similar type of concept as SODA.

You could make a single cup of coffee without having to go to an actual store, wait in a line, fight for a parking spot, etc. The stock was trading at $41 at the time. The stock hit $116 seven months later.

It was one of the biggest winners of all time in the market. Also consider that Green Mountain was at one time a $1 stock. Well, I think that SodaStream has a similar model to Green Mountain Coffee.

While I love stock performance, I also demand value in the stocks that I buy. I have seen too many high-fliers over the years get their wings clipped because of high valuations. Let's take a look at SodaStream's current valuation.

Data from Best Stocks Now App

The company is expected to be able to grow their earnings by 25% per year over the next five years. This is the consensus analyst's estimate. They have been growing their earnings by 144% per year over the last five years.

It has been one of the fastest growing companies from an earnings-stand-point in the entire market! This is also one of the strongest growth stocks going forward in the market!

SODA is currently trading at 21.8X forward earnings. This means that SODA is still trading at a discount to its growth rate. It has a PEG ratio of 0.89.

When I take the current earnings of SODA, carry them at a 25% rate over the next five years, and apply a multiple that I think is appropriate, I come up with a target price of $126. The company is currently trading at $70 dollars; so therefore, I think there is lots of upside potential.

I require three things in stocks before I buy them: Performance, value, and a healthy stock chart. Let's next take a look at a one-year chart of the share:

SODA passes my performance test. SODA passes my valuation test. And SODA has a good, healthy stock chart. Now if we can just keep this market from rolling over!

Of the 3,384 stocks that I track on a daily basis, SODA comes in at number 61 and earns an overall grade of "A". At this time, aggressive growth clients of Gunderson Capital Mgt. are long the stock.

Data from Best Stocks Now App

Disclosure: I am long SODA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.