first_img Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Our 6 ‘Best Buys Now’ Shares Image source: Getty Images. Simply click below to discover how you can take advantage of this. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Shares in flavoured tonic water supplier Fevertree Drinks (LSE: FEVR) tanked last week after it revealed revenue and profits would come in lower than previously expected following a weak end to trading in 2019. Like many investors, I’ve been weighing up the reasons for and against building a stake in the former market darling. Here’s my take.Reasons to be optimisticThe first reason Fevertree’s shares might be worth buying is simply based on the assumption that the market has overreacted. Despite flagging sales in the UK, growth overseas (including 33% in the US) has been encouraging. You might argue that Fevertree is merely experiencing the predictable pains endured by all successful businesses when their domestic markets mature.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Second, Fevertree has a history of scoring highly on metrics such as operating margins and returns on capital employed — just the sort of business preferred by star fund manager Terry Smith. Importantly, those that built the company from scratch also remain in post with sizeable shareholdings.Third, Fevetree’s finances are in sound order with management expecting to report a year-end cash position of £128m in March. Many firms would kill for its balance sheet. Fourth, Fevertree doesn’t feature high up the list of those stocks currently receiving attention from short-sellers. That suggests even the most pessimistic market participants lack the conviction, at least for now, to truly bet against CEO Tim Warrillow and his team being able to turn things around. A final, admittedly speculative, reason is that Fevertree’s dramatic fall from grace makes it a bid target. Potential US suitors include beverage giants Coca Cola and PepsiCo. In the UK, Diageo — owner of gin brands Gordon’s and Tanqueray — could also be running the rule. On the other hand… The first reason I’d steer clear is the possibility we’ve reached ‘peak gin’ in the UK, at least based on the revenue growth stagnating. Like most things, specific drinks gain and lose popularity over time. Perhaps recent trading is the first indication of a reversion to the mean.Second, there’s still no certainty the company’s performance in the UK can be replicated overseas where the popularity of a gin and tonic is arguably lower. Moreover, the trend towards premiumisation could slow if concerns over the global economy gather pace, leading consumers to switch to lower-priced alternatives, or avoid them altogether.  A third reason relates to increased competition and the lack of an economic moat. With the aforementioned excellent margins, it was only a matter of time before more established rivals set out to steal market share back from the AIM-listed upstart. Even if the demand for mixers were to remain, there’s no guarantee fickle shoppers won’t gravitate towards other brands. Fourth, the potential opportunity cost of missing out on gains elsewhere must be considered. This is particularly relevant here given that Fevertree returns very little cash to shareholders. As such, investors might reasonably ask whether it’s worth waiting for a recovery if they aren’t being compensated for their patience.  The final reason to avoid Fevertree rests on its valuation. Despite falling 60% from the highs reached in September 2018, the stock still trades on a lofty 30 times forecast earnings — mightily expensive for a company issuing profit warnings.In sum, I remain undecided and that’s sufficient for me to stay on the sidelines for now. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee.center_img “This Stock Could Be Like Buying Amazon in 1997” 5 reasons why I’d buy the Fevertree Drinks share price (and 5 reasons I’d steer clear!) I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Enter Your Email Address Paul Summers | Saturday, 25th January, 2020 | More on: FEVR See all posts by Paul Summerslast_img

Published by admin

Leave a Reply

Your email address will not be published. Required fields are marked *