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Fevertree Drinks Plc (LON:FEVR), is not the largest company out there, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£24.00 and falling to the lows of UK£20.15. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Fevertree Drinks' current trading price of UK£20.15 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fevertree Drinks’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Fevertree Drinks still cheap?
Fevertree Drinks appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Fevertree Drinks’s ratio of 49.06x is above its peer average of 20.03x, which suggests the stock is trading at a higher price compared to the Beverage industry. But, is there another opportunity to buy low in the future? Given that Fevertree Drinks’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Fevertree Drinks generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Fevertree Drinks' earnings over the next few years are expected to increase by 46%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in FEVR’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe FEVR should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on FEVR for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for FEVR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
It can be quite valuable to consider what analysts expect for Fevertree Drinks from their most recent forecasts. At Simply Wall St, we have the analysts estimates which you can view by clicking here.
If you are no longer interested in Fevertree Drinks, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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