Don’t Blow It Next Week, Sodastream International Ltd (SODA)

We’re now exactly one week away from Sodastream International Ltd (NASDAQ:SODA)‘s next quarterly report, and things are finally starting to heat up for the maker of cool drinks.

The same market that has ignored SodaStream’s healthy financial performances outside of a short-lived rally two summers ago is starting to pay attention. The shares are up nearly 40% since its previous quarterly report.

It’s about time.

SodaStream’s fundamentals have been on beast mode since its 2010 IPO. The company behind the popular system that turns still water into sparkling soda has managed to blow through Wall Street’s profit targets in each of its first seven quarters as a public company. It hasn’t even been close.

Source: Thomson Reuters.

This is the kind of momentum that should excite investors, but that enthusiasm has either been nonexistent or fleeting in the past. It does feel different this time.

Stepping up to the big boys
Whether it was the record performance across all three product categories during the third quarter or the Super Bowl commercial earlier this month, SodaStream is silencing the skeptics who have argued that home-based soda brewing is a fad.

Growth investors also have to like what they see when they size up SodaStream to cola war behemoths PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Company (NYSE:KO) . SodaStream is calling them out in its ads, and investors may as well call them out in making a valuation argument.

All three companies share similar profit multiples, fetching between 16 and 18 times this year’s projected earnings. However, while PepsiCo and Coca-Cola are expected to grow revenue by 4% to 5% and profitability by 7% to 8%, SodaStream is a bubbly speedster. Analysts see the latter growing its revenue by 20% on a 29% bottom-line pop.

Naturally, there are reasons why Coca-Cola and PepsiCo deserve healthy market premiums to their growth rates. They have been reliably consistent for decades. They’re blue chips ringing up tens of billions in annual revenue.

However, SodaStream has been too cheap for too long. It’s time that the fizz maker got in on the fun.

Wednesday, don’t be late
SodaStream sold a record 941,000 soda maker kits, 4.3 million carbonator refills, and 7.7 million syrup bottles during its third quarter. Investors know that SodaStream will deliver big year-over-year results, but they will also be keeping an eye on sequential trends.

You don’t want to see carbonators or flavors dip in volume next week, even though there are some seasonal considerations here, given soft drink consumption trending higher during the summer as a refreshment.

Analysts see SodaStream coming through with a profit of $0.38 a share for the quarter, comfortably ahead of the $0.32 a share it posted a year earlier. It should be a welcome break from Wall Street targeting a year-over-year decline in profitability when PepsiCo reports tomorrow.