SodaStream's Presence Increasing in Wal-Mart Stores
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Over the last few months I’ve done quite a bit of traveling. In every city I always end up visiting the local Wal-Mart (NYSE: WMT). I don’t really know why I choose to visit local Wal-Marts, it’s probably the same reason that I choose to buy Crest toothpaste. It’s a result of cutting edge marketing techniques and advertising that makes me believe that no matter what I have to shop at a packed Wal-Mart with other brainwashed consumers such as myself. I suppose it makes sense, after all Wal-Mart is the largest retailer in the world with over $450 billion in annual sales. Therefore, the company should be able to make me believe that I am getting the best deals and having a good experience despite the fact that I can usually get the same products much faster at a cheaper price at my local Dollar Tree or Dollar Store.
As an investor, and as a consumer, one thing I’ve noticed is that Wal-Mart has a very efficient process of driving the consumers to certain products in respective regions of the country. When I’m in my home state of Tennessee I see water coolers, camouflage, and sporting goods. But when I’m in Chicago I see more dress clothes and a diversified presence of technology for the fast-pace city folks. Now I know this is somewhat stereotypical, but if you’re a person who travels a lot then you can vouch that I am speaking the truth.
Like I said, I don’t necessarily have an agenda to visit every Wal-Mart in America but for some reason the store attracts me like a magnet. It’s a sad reality that I must face; I could very well be the first consumer to visit every Wal-Mart in the entire country before I die. I still have a ways to go, but over the last few months I have picked up my pace and I have also noticed a very common trend in Wal-Mart stores across the country, more specifically in the southeast, and that is the presence of SodaStream (NASDAQ: SODA).
I should first mention that I am indeed a SodaStream bull and do own shares of the company, therefore it is possible that their products attract me in the same way as a Wal-Mart in a new city. However, I have noticed that during the last few months SodaStream products have become a crucial component of the display products at every single Wal-Mart I’ve visited. Back when SODA first began selling its products at WMTs I was unable to find them, as it took time to get the products in the stores and the products were usually hidden somewhere deep in the aisles with coffee machines. But in the last few months I’ve taken notice that SODA products are no longer hidden from the consumer, and have migrated to the front of the store in its own display casings. This means that SODA products are strong sellers, as there are always a few people looking at the products. Or I guess it could mean there is too much supply, although I doubt it. In my opinion, this is a breakthrough for SODA, and its investors, because this new-found presence and emphasis in Wal-Marts has not been priced into its stock. In fact, the stock has rarely moved, but the company continues to grow in size and become more attractive as a value investment.
For those of you who don’t know, SODA is a fast-growing company and an underperforming stock that has been trading in the same range for the last two years. Yet over the last two years the company has grown from revenue of $211 million to its current $345.63 million over the last 12 months, and has nearly tripled its income in the same period. And what’s even more impressive is that it has achieved all of this growth without the world’s largest retailer, as it has only been in WMT stores as of late. The fast-growing company is now trading with an attractive price/sales ratio of 2.30 and a forward P/E ratio of 13.03, indicating that it is a fast-growing value investment. Now that the company has entered WMT most have speculated that it will receive a sudden boost to sales, and after seeing the emphasis that WMT is placing on its products, I tend to agree with the notion.
SodaStream is a company that has stayed in the same range in terms of performance over the last two years. It has a direct tie to the performance of Green Mountain Coffee Roasters (NASDAQ: GMCR), and has found it difficult to maintain gains since GMCR’s fall. However, the two companies couldn’t be further apart: GMCR is a company that has lost value due to a surplus of supply, not enough demand, increased competition, and concerns over patents. SODA, on the other hand, continues to grow aggressively year-over-year and has a future that appears brighter than ever now that it has made a splash in the world’s largest retail store. SodaStream products have expanded across the board into multiple stores and from what I can tell have been welcomed with open arms. I think this is a stock that investors should watch closely, because if its upcoming quarter is as strong as I anticipate (due to the Wal-Mart effect) then this is a stock that could break-free from its two year range and quickly trade to new all-time highs with a significant presence in a Wal-Mart near you!
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BrianNichols owns shares of SodaStream. The Motley Fool owns shares of SodaStream and has the following options: long DEC 2012 $16.00 puts on Green Mountain Coffee Roasters and short DEC 2012 $21.00 calls on Green Mountain Coffee Roasters. Motley Fool newsletter services recommend Green Mountain Coffee Roasters and SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.