Today I’m weighing up the investment prospects of two British beverages giants: Fevertree Drinks (LSE: FEVR) and Britvic (LSE: BVIC).
Mixing it up
Fevertree has emerged as a star stock market performer in recent years, the stock doubling in value in 2016 alone. And a bubbly trading statement in Tuesday trade has sent its share value to fresh record peaks and up 5% from Monday’s close.
Fevertree announced that “the strong growth achieved in the first half of the year accelerated in the second half of 2016,” the company now expecting sales from July-September to have risen 75% year-on-year. Full-year sales are expected to have swollen 73%.
And the mixers specialist said that sales in the final two months of 2016 were stronger than expected, particularly in its home UK markets. As a result it expects results for the full-year to be “materially ahead of its expectations.”
Demand for its premium products surged 118% at home during 2016. But Britain was far from the whole story, with revenues in the US and Continental Europe advancing 55% and 39% respectively in 2016. And sales across the rest of the world leapt 88% from a year earlier.
Brit pick
However, it isn’t the only beverages play making serious headway in foreign climes, as evidenced by Britvic’s latest financials.
The business announced in November that revenues shot 10.2% higher during the 12 months to September 2016, with strong performance in foreign territories helping to drive the top line.
Indeed, Britvic lauded its maiden year in Brazil in particular, one of the world’s largest soft drinks markets following the acquisition of ebba a couple of years ago. And the company has since snapped up juice giant Bela Ischia to bolster its exposure still further.
And Britvic isn’t only making significant headway in emerging markets, with November’s update also revealing improving uptake of its Fruit Shoot brand in France and the US.
Growth greats
At first glance Britvic could be considered the more appealing growth pick, at least on the basis of both firms’ paper valuations.
It’s expected to endure a 3% earnings decline in the year to September 2017. But this still results in a P/E ratio of 12.1 times. And a predicted 5% bottom-line bounce-back in fiscal 2018 drives the earnings multiple to an even-better 11.5 times.
By comparison, Fevertree isn’t anticipated to endure any earnings troubles in the medium term as demand for its mixers steadily takes off. Indeed, growth of 9% and 5% is chalked in for 2017 and 2018 respectively.
These figures result in conventionally-high P/E ratios of 50.3 times and 47.9 times. However, its strong sales momentum, particularly in a still-under-penetrated market, may still make it a preferential pick for many growth hunters.
But in my opinion, I reckon the terrific sales potential of both companies both at home and abroad makes Britvic and Fevertree brilliant long-term stock picks.
