Adj earnings up 97% but fail to satisfy market
Companies: Fevertree Drinks PLC
FEVR shares took a hit this morning after the Group's preliminary results proved to be less impressive than investors were hoping for, despite posting a very strong 97% increase in adj EBITDA and a doubling of diluted EPS after impressive UK growth.
Shortly after the market opened, the premium tonic brand was trading at c.6% below Monday's close, which could be expected considering the huge valuation the company currently has: £1.6bn market cap and a P/E of roughly 60x 2017 earnings.
The firm, which has consistently beaten broker consensus and forecasts, reported revenues of £102m (+73% YoY), an improved profit margin at 55% (2015: 52%), adj EBITDA up 97% to £35.8m, and a 106% jump in diluted EPS to 23.7p. The results were in line with analysts forecasts, after three upgrades during the past 12 months, explaining today's share price move as the market has become used to FEVR beating expectations.
Broker Whitman Howard said Fever-Tree’s prelims were marginally ahead of its EBITDA forecasts of £35.6m estimate and in front of £34.9m consensus forecast. The firm added that adj diluted EPS was consistent with its estimate of 23.7p, but slightly below the 24p predicted by consensus.
Whitman has a target price of 1250p on FEVR, believing that its current 58.1x 2017 P/E multiple is a "significant premium" to its peers:
"Our preferred stock in the sector is Nichols (NICL LN, BUY, T/P 1760p) who trade on a 28.2x 2017 P/E. We base our Fever Tree price target on a 49.7x 2017 P/E ratio. HOLD."
CEO Tim Warrillow said it had been another exceptional year of growth, with strong results achieved across all regions, channels and flavours, which he said emphasised the global appeal of the brand.
"We have had an encouraging start to 2017 and remain confident that we are increasingly well positioned to deliver further growth across the business."
Shares in FEVR fell 6% in early trading, having increased more than 700% since its IPO in 2014.
