Sodastream International Ltd (NASDAQ:SODA) is a relatively new company in the U.S. beverage industry, with PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Company (NYSE:KO) being two of the dominant forces in this particular industry for decades. SodaStream, after its success in the European markets, is one of the hottest companies in the stock market, as it has a lot of growth potential.
The company operates under a razor-blade model, and its primary product is a soda maker which lets consumers create their own carbonated beverages. Possibly, one of the biggest advantages for the company is that its products are eco-friendly. Not only does this prevent consumers from throwing thousands of cans and bottles everyday, but the sodas are healthier compared to other bottled sodas in the market. Sodas made using the Sodastream International Ltd (NASDAQ:SODA) syrups have less calories, sugar and carbs.
With a market capital of around $1 billion, SodaStream is currently trading between $45 to $55. PepsiCo and Coca-Cola are currently trading between $75 to $77 and $35 to $40 respectively, with PepsiCo being overvalued compared to its growth opportunities. Sodastream International Ltd (NASDAQ:SODA), on the other hand, is undervalued compared to its growth rates and future growth potential. The latest quarter for SodaStream saw a revenue growth of around 55%. Net income increased nearly 60% compared to the same quarter in 2011.
SodaStream’s revenue of $132.9 million outperformed Wall Street estimates of around $121 million. EPS also rose 56% to $2.09 per share. The reason why SodaStream is not appealing to some investors is that the company doesn’t pay cash dividends. PepsiCo and Coke, on the other hand, have a reputation of paying cash dividends, and have dividend yields of 2.8% and 2.9%, respectively.
While the 2 companies have been paying dividends, they have been quite shaky in terms of capital gain. We all know that paying dividends is not always a good thing, and if Sodastream International Ltd (NASDAQ:SODA) continues to grow in this fashion, then it would be an ideal opportunity for patient investors in terms of a long-term capital gain.
Another highlight from the latest earnings report was a 96% growth in revenue from the American side of the business. Over 47% of the company’s total revenue came from sales in the U.S. This means that nearly half of the company’s revenue comes from the U.S., which is the largest soda industry in the world.
Over a million Soda machines were sold in the U.S. This doesn’t only mean that the company generated enough revenue from the country, but this also means that people will continue to buy syrups and C02 Canisters, which would maintain a steady stream of revenue for the company in the coming years. Selling these “razors” would also help the company to match PepsiCo and Coca-Cola’s steady revenue of soda cans and bottles.
The reason why this is such a crucial point is because Sodastream International Ltd (NASDAQ:SODA)’s growth lies on its performance in the U.S. market. Previously, people claimed that it was a fad; however, SodaStream continues to grow in the U.S market. If the numbers keep on growing, SodaStream is set to shine in the U.S., like it did in the European market. After sales of 1 million soda makers in the U.S., the company claimed that sales exceeded expectations and that the company has high hopes in this huge soda market. PepsiCo and Coca-Cola are still dominating this huge market, with very few competitors. SodaStream now has a chance to become the third dominant force in the U.S soda market.