Saturday, June 23, 2007

Drink and Soda Stocks By the Numbers

In this article, we look at different Drink and Soda Stocks and look purely at the raw numbers. (Data taken from Yahoo Finance on Thursday, June 21, 2007):










SymbolStock NameMyPEGForward PE5 yr growthYield
HANSHansen Natural0.77 22.8028.60%0%
CEDCCentral European Distribution0.9618.1017.50%0%
STZConstellation Brands1.2514.4811.50%0%
JSDAJones Soda1.2746.8834.00%0%
DEODiageo1.3017.2210.50%2.30
PEPPepsi1.3217.8511.00%2.30
BUDAnheuser-Busch1.5217.139.00%2.20%
KOCoca Cola1.5818.158.50%2.60%


In order to understand the chart, we have to understand the different elements.

MyPEG

MyPEG is my own variation of the PEG Ratio. A MyPEG of less than one means the stock is cheap relative to its growth. A MyPEG of greater than two means the stock is very expensive relative to its growth. More info on MyPEG in this link.

Forward PE

Forward PE is the Price divided by Forward estimated earnings. When choosing between a stock that has a PE of 15 and a growth rate of 15% vs. a stock that has a PE of 30 and a growth rate of 30% (both have a PEG ratio of 1), I'll prefer the former. The reason is that high PE's are often priced to perfection. Any miss and high PE stocks can get hit very hard. Stocks with Lower PEs have less expectations and have a greater margin of safety. Another reason is that I have more confidence in the forward PE than the 5 yr. estimated growth rate. So the results are better by preferring the lower PE stock given an equivalent PEG or MyPEG because the 5 year growth rate is given less importance. Lastly, stocks can't maintain 30% plus growth for long periods of time, so growers from 15-30% might be preferred.

5 Yr Growth

5 Yr Growth is an estimate by the analysts. As I discussed earlier, the higher the better, though some people such as the legendary Peter Lynch have suggested that buying fast stocks, but not too fast, might be a good idea (from Peter Lynch's One Up On Wall Street : How To Use What You Already Know To Make Money In The Market).

Yield

The higher yield, the better. If you have a high yield, high growth, and low PE, that's a good combination.











SymbolStock NameEV/EBITDA%Short%Inst. Own
HANSHansen Natural23.8914.70%60.70%
CEDCCentral European Distribution16.5110.20%62.30%
STZConstellation Brands9.8111.40%83.90%
JSDAJones Soda105.6826.30%27.30%
DEODiageo13.420%18.70%
PEPPepsi12.590.60%68.50%
BUDAnheuser-Busch11.170.90%63.00%
KOCoca Cola15.351.30%64.50%



EV/EBITDA

Enterprise Value divided by Earnings Before Interest, Taxes, Depreciation and Amortization. It is another measure of valuation. The lower the Better. A value of 8 or less is very good.

% Short

The higher the percentage, the higher number of people who believe the stock should go down. However, the higher the percentage, the better for those who go long because if good news is to hit a stock, not only does the price go up, but all those people who are shorting have to "cover" (Buy a stock to fulfill their loan obligation to the broker) their short position further fueling the gains. This is often called a "short squeeze".

% Institutional Ownership

People have different theories on this. Some people, like Peter Lynch, prefer a stock without that much institutional ownership. Because once the big mutual funds discover the stock, this could propel the stock to multibagger (make many times your money on your original investment) heights. However, some prefer a higher institutional ownership because that means that mutual funds and other institutional investors are already buying the stock (and may have them in their approved to buy list), and when more money comes in, they may add to their position.

Conclusion

Based on all this and based on just the numbers, Hansen Natural (HANS) and Central European Distribution Corp (CEDC) seem to have the best Growth at a Reasonable Price ratings.

Note that there are other companies that were not looked at including AmBev (ABV), a South American Drink Company, and National Beverage Corp (FIZZ), because there was some missing information. They could still be very good investments, however.

2 comments:

Marlon said...

There is no doubt that HANS has significant growth dimension. So you picked it for growth quality. But is its current technical position equally sound? It's ROE faced decline after the 2005 high. Please do suggest.

techfarmer said...

Good question.

As of March 11, 2009, HANS is at 35.54.

50 day moving average is at 33.88.
200 day moving average is at 29.18.

One positive is that HANS is above both the 50 and 200 day moving average.

However, currently, HANS is near resistance over the last year at around $37. Breaking above this would be bullish.

I would start to worry if HANS goes below its 50 day moving average first. Then, if it goes down below $30 (several month double bottom level), that would be worrisome as well.

Today's chart of HANS