By comparison, Sodastream International Ltd (NASDAQ:SODA) has been solidly profitable for years and trades at a reasonable valuation compared to expected growth of 25% going forward. As a result of the company’s track record of financial success, the primary risk is competition. For SodaStream, competition is far easier to assess than it is with Rosetta Stone Inc (NYSE:RST); unfortunately for Sodastream International Ltd (NASDAQ:SODA), known competition comes from mega cap companies such as The Coca-Cola Company (NYSE:KO) that already own a dominant position in the soft drink industry. While The Coca-Cola Company (NYSE:KO) hasn’t offered any response to the potential disruption of the industry by home carbonation, it is certainly worth monitoring any developments regarding any future adaptation of the Coke Freestyle machine , which Coca-Cola spent $100 million developing, for the home. The Coca-Cola Company (NYSE:KO) and others have the ability to outspend SodaStream on research and development. Sodastream International Ltd (NASDAQ:SODA) will also face competition from kitchen appliance makers.
While SodaStream is likely to experience competition on a number of fronts, it is important to note that the company has already taken steps to mitigate the impact. SodaStream deserves a lot of credit for seeking strategic partnerships to release well known flavors including Kool Aid, Country Time, and Ocean Spray as well as appliance partnerships with KitchenAid and Samsung.
Evaluate which company is a better fit for the investment objectives of the individual investor
In addition to evaluating the merits and risks of each company, it is important to consider personal considerations. For example, a small portfolio of five stocks may not be well served by having both SODA and KO as holdings. There is nothing preventing both companies from continuing to outperform the market, but there is a clear overlap in terms of risk that will not help achieve the objectives of a diversified portfolio. Each investor also has a unique set of investment criteria, which may include factors such as a requirement of a certain track record of profitability. Accordingly, Rosetta Stone may not meet the criteria for consideration.
Make a decision based on the long-term view
A focus on the long term investment thesis of any addition to a personal portfolio is really the key to the decision process, whether it be between choosing Rosetta Stone Inc (NYSE:RST), Sodastream International Ltd (NASDAQ:SODA), or any other publicly traded company. In this particular case, I continue to believe (and back with both a CAPScall and my personal investing dollars) that both companies will outperform the S&P 500 over the long-term.
The article Rosetta Stone vs. SodaStream: Which Is a Better Investment? originally appeared on Fool.com and is written by Brian Shaw.
Brian Shaw owns shares of Google, Coca-Cola, SodaStream, and Rosetta Stone. The Motley Fool recommends Coca-Cola, Google, Rosetta Stone, and SodaStream. The Motley Fool owns shares of Google, Rosetta, and Sodastream. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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