by Deborah OMalley | September 2, 2011 8:08 am
If you’re thirsty for potential double-digit returns, you might want to consider investing in National Beverage (NYSE:FIZZ).
The U.S. holding company operates several subsidiaries that manufacture, market and distribute a wide range of nonalcoholic drinks under the Shasta, Faygo, LaCroix and Everfresh brands.
Despite strong competition in the soft drink industry — from rivals like Coca-Cola (NYSE:KO) and PepsiCo (NYSE:PEP) — National Beverage has achieved success by offering lower-priced soda pop, juice and water alternatives.
In addition to low prices, the company has gained popularity by aggressively marketing creatively packaged energy drinks. It also focuses on nutritionally enhanced juices and waters for health-conscious consumers.
And, with a strategic focus on distributing its drinks across convenience stores in the U.S., FIZZ currently appears to be bubbling.
Technically, the stock is in a major uptrend and shows no signs of slowing down.
Over the past two years, shares have more than doubled, climbing from around $8 in early September 2010 to their current all-time high near $16.50.
Recently moving above an important resistance level, near $16, FIZZ has just completed a long-term ascending triangle pattern. When ascending triangle patterns are bullishly broken, as is the current case, the trend is typically up.
The measuring principle for a triangle, which is calculated by adding the height of the triangle ($16.50-$7.50=$9) to the breakout level ($16.50), shows shares could reach a target price of $25.50 ($9+$16.50).
At current levels, this represents a whopping 55% gain! However, with no historical resistance in sight, FIZZ could bubble even higher.
From a fundamental perspective, the company also shows good growth potential.
In mid-July, FIZZ reported upbeat fiscal fourth-quarter and full-year 2011 results (for the period ending April 30, 2011).
Achieving the goal of being innovative and creative in the development of beverages, the company posted a modest fourth-quarter sales increase of 1.7% to $152.1 million, from $149.6 million in the comparable year-ago period.
Revenue for the full 2011 fiscal year edged up 1.1% to $600.2 million, from $593.5 the year earlier.
As more and more people get hooked on the company’s energy drinks, analysts predict full-year fiscal year 2012 revenue will increase 2.1% to $613 million.
The earnings outlook is also solid.
Fiscal fourth-quarter earnings increased 20% to 24 cents per share, from 20 cents per share in the same period a year-ago. The gain was driven by increased profit margins.
Full-year fiscal 2011 earnings year, earnings bubbled up 24% to 88 cents per share, from 71 cents per share a year earlier. Analysts expect continued growth into fiscal 2012, with earnings increasing an additional 6%, to 93 cents per share.
Although FIZZ appears somewhat richly valued, the company has a healthy balance sheet, with $7.4 million in cash and no long-term debt. This liquidity (no pun intended) will give the beverage company the financial freedom to continue developing innovative new drinks.
Given that FIZZ shows fundamental and technical strength, I believe the stock could make a good investment for those seeking potential double-digit 55%-plus returns.
As of this writing, Deborah O’Malley did not own a position in any of the stocks named here.
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