4. The Vita Coco Company, Inc. (NASDAQ:COCO)
The Vita Coco Company, Inc. (NASDAQ:COCO) is among the stocks Jim Cramer discussed alongside the tech market divide. Cramer showed bullish sentiment toward the stock after the recent pullback, as he stated:
Since bottoming at $7 and change in November of 2022… this stock has rallied roughly 560% in a little over three years, and that’s after it pulled back a dozen points over the past few weeks. I think this could be a nice buying opportunity.… This is how you build wealth, people. You own the index fund, and you own a couple of stocks like this… What matters are the numbers, and the numbers have been downright fantastic… What the pullback reflects is the simple fact that the stock is at a relatively high price to earnings multiple… It’s trading at just under 32 times this year’s earnings estimate. I won’t deny it; That’s pretty rich for beverage companies. But here’s what I will say. First, throughout the entire time the Vita Coco has been public, its shares have traded mostly in the 25 to 40 times earnings range.
And if you’ve let that valuation keep you out of the stock, well, you know what you would’ve missed. Second, the company is expected to put up 30% earnings growth this year, and there’s nothing wrong with paying 32 times earnings for a company that can grow at a 30% clip. Growth-oriented money managers will typically be willing to pay a price-to-earnings multiple that’s one to two times the growth rate. So 32 times earnings is much closer to the floor than the ceiling for this stock. Plus, when you look at next year, Vita Coco should earn $1.80 per share, meaning it sells for about 27 times next year’s numbers. That’s perfectly reasonable given its incredibly high growth rate.
Putting it all together, I like what I see from Vita Coco after finally taking the chance to get into it. I’m sorry I didn’t do it earlier. This is a uniquely strong story within the troubled food and beverage space, one that’s very much on trend with younger consumers, which is why this company’s taking share all over the world. Here’s the bottom line: You rarely get a chance to buy a powerful long-term winner after a quick 20% pullback, especially when that pullback appears to have very little to nothing to do with the fundamentals, but that’s exactly what’s happened to Vita Coco. When a terrific company like this comes around, I think you should take it.
The Vita Coco Company, Inc. (NASDAQ:COCO) develops and distributes coconut water and related products under the Vita Coco brand and other beverage brands internationally.
