Celsius Holdings (NASDAQ: CELH) has been a terrific growth stock to own over the past decade as each its top and bottom lines have soared. But this yr has been a nightmare for shareholders of the energy drink company. Its growth rate has slowed, and with a concerning outlook ahead, the stock has been in a free fall.
Yr up to now, shares of Celsius are literally down greater than 35%. The stock may thoroughly be headed for its worst yr since 2011. Is Celsius in deep trouble, or could this be a tremendous time to take a position throughout the energy drink company?
Celsius stock has normally been a solid investment
Celsius has been probably the best growth stocks to own over the past decade, since it has generated mammoth, life-changing returns for its investors. Here’s a breakdown of its annual returns by yr.
|
Yr |
Celsius Stock Return |
|---|---|
|
2023 |
57.2% |
|
2022 |
39.5% |
|
2021 |
48.2% |
|
2020 |
941.6% |
|
2019 |
39.2% |
|
2018 |
-33.9% |
|
2017 |
114.3% |
|
2016 |
26.3% |
|
2015 |
288% |
|
2014 |
47.1% |
|
2013 |
68.7% |
|
2012 |
-4% |
|
2011 |
-50% |
Data source: YCharts.
Besides an “off” yr in 2018, the stock has fairly consistently generated solid annual returns of a minimum of 20% per yr for the past decade. That features one exceptional yr in 2020, when it shot up greater than 900%. The problem is that when a stock rallies so much, expectations develop into inflated, making it difficult for the stock to remain a hot buy with growth investors.
Why is Celsius stock struggling so badly this yr?
Celsius’ business has achieved some incredible growth through the years since it has established itself as one in all the very best energy drink corporations in North America. But its sales growth rate has been slowing down this yr. The company’s key distribution partner, PepsiCo, has also decided to cut back its inventory of Celsius products. That may be a concerning sign that the expansion rate may slow even further within the approaching quarters, and that the final outlook might be not that encouraging, either.
Investors have develop into accustomed to paying high multiples for Celsius stock so far, but as its growth prospects have develop into more concerning, there’s less of an appetite to perform that. Today, the stock trades at over five times its trailing revenue. That may be a giant adjustment compared with how highly investors were valuing the stock previously.
Through the first half of this yr, Celsius has reported revenue totaling $757.7 million, which is up 29% yr over yr. That isn’t a nasty growth rate by any stretch, but so far it wasn’t unusual for the company to be doubling its top line. With Celsius perhaps not looking like a growth machine, investors have adjusted the premium they’re willing to pay for the business.
Is Celsius stock an important contrarian buy today?
Celsius has develop into profitable of late, and based on analyst expectations of future earnings, it’s trading at roughly 32 times next yr’s profits. That doesn’t strike me as an unreasonable multiple for a business that continues to be growing at a rate of around 30%. And with Celsius throughout the early stages of its international expansion plans, the business is by no means running out of growth opportunities just yet.
Provided that you simply simply’re willing to be patient with the company, Celsius stock could make for a tremendous buy directly, since it still has plenty of room to grow over the long haul.
Do you have got to speculate $1,000 in Celsius directly?
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David Jagielski has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Celsius. The Motley Idiot has a disclosure policy.
Celsius Holdings Is On Track for Its Worst Yr in Over a Decade. Is This a Huge Buying Opportunity for Investors? was originally published by The Motley Idiot