Fevertree Drinks Plc – Value Analysis (LONDON:FEVR) : December 21, 2017

Capitalcube gives Fevertree Drinks Plc a score of 84.

Our analysis is based on comparing Fevertree Drinks Plc with the following peers – A.G. BARR p.l.c., Majestic Wine PLC, Chapel Down Group plc and Nichols plc (BAG-GB, WINE-GB, CDGP-GB and NICL-GB).

Investment Outlook

Fevertree Drinks Plc has a fundamental score of 84 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative outperformance over the last year has faded more recently.
  • It currently trades at a Price/Book ratio of (23.74).
  • FEVR-GB‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • FEVR-GB has relatively high profit margins while operating with median asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, FEVR-GB‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While FEVR-GB‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company is likely overinvesting in a business with only median returns.
  • FEVR-GB has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

FEVR-GB has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 0.32% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 0.32%), and a well-cushioned interest coverage level of 710.41x, FEVR-GB can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 4 chosen peers for the company, only 2 of the stocks have an outstanding debt balance. Companies with no debt include CDGP-GB and NICL-GB.

FEVR-GB has maintained its Quick & Able profile from the prior year-end.

  • FEVR-GB‘s interest coverage is its highest over the last four years and compares to a low of 1.48x in 2013.
  • While its interest coverage increased to 710.41x from 32.42x (in 2015), its peer median decreased during this period to 53.99x from 123.71x.
  • Interest coverage rose 747.71 points relative to peers (and is now higher than its peer median).
  • FEVR-GB‘s debt-EV is its lowest over the last four years and compares to a high of 3.18% in 2014.
  • The decrease in its debt-EV to 0.32% from 0.89% (in 2015) was also accompanied by a decrease in its peer median during this period to 0.32% from 0.89%.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
A.G. BARR p.l.c. 1.21 1.35 53.75 946.07
Majestic Wine PLC 19.25 1.23 6.15 53.62
Chapel Down Group plc 0 3.58 53.99 999
Nichols plc 0 3.11 3737.38 999
Fevertree Drinks PLC 0.32 3.44 710.41 681.71
Peer Median 0.32 3.11 53.99 946.07
Best In Class 0.32 3.58 3737.38 999

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Company Profile

Fevertree Drinks Plc manufactures and supplies premium carbonated mixes. It sells carbonated mixers to hotels, restaurants, bars and cafes as well as supermarkets and off-licenses for retail purchase. The company was founded by Rolls Charles Timothy and Warrillow Timothy Daniel Gray in 2004 and is headquartered in London, The United Kingdom.

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