FeverTree: H1 Showed Costs are On Track, Even if Growth is Not (Yet)
Comapny Update (FEVR LN) (Buy): Shares fell 12% after results and are lowest since 2016, but key parts of our thesis were validated.
Highlights
Sales growth was +10% in U.S., +1% in Europe (on depletions), -6% in U.K.
There were one-offs like bad weather, and sales grew 13% in July-August.
More importantly, Gross Margin recovered ~500 bps and EBITDA rose 79%.
A reduced 2024 outlook still implies EPS rising 74% and a P/E of ~28x.
At 766.5p, “standalone” forecasts show 78% total return (19.8% IRR) by 2027.
Introduction
FeverTree released H1 2024 results on Thursday (September 12). Shares finished the day down 11.6% and were flattish on Friday, which means they are now back to their 2016 levels and nearly 20% below COVID trough in 2020:
FeverTree Share Price (Since IPO)
Source: Google Finance (15-Sep-24).
We initiated our Buy rating on FeverTree in June 2024, and added it to our “Select 15” model portfolio as a small position in mid-July. Both proved far too early, with FeverTree shares having fallen by 28.3% in the 3 months since our initiation. We hold FeverTree in real-life, and have added moderately to our position on Thursday.
H1 results disappointed, but also validated key parts of our thesis. Sales growth was weak, but the result of cyclical headwinds and one-offs, and showed early signs of improving. Margins improved significantly as expected.
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