| Date | Subject |
|---|
29/2/2020
09:20 | christh: ‘Do nothing’ Train buys Fevertree after 6 year wait
By Gavin Lumsden 28 Feb, 2020
Nick Train, one of the UK’s few remaining star fund managers after the downfall of Neil Woodord, has scooped up a stake in battered tonic maker Fevertree (FEVR) and declared himself uninterested in the stock market turmoil caused by the coronavirus.
Train invested 0.6% of Finsbury Growth & Income Trust (FGT) in Fevertree this month as its share price sank following a profits warning in January caused by disappointing Christmas trading.
The Citywire AA-rated fund manager told shareholders in the £1.7bn investment trust that Fevertree was ‘a classic Lindsell Train idea’, referring to the investment firm he co-founded with Michael Lindsell 20 years ago.
After a meteoric rise from their flotation in late 2014 as Fevertree stole market share from Coca-Cola’s Schweppes, the company’s shares peaked at over £38 in September 2018. Since then they have plunged by two thirds as fears have grown about the company’s US expansion and whether the UK tonics market has lost its fizz.
More than tonic
Train acknowledged the £1.5bn company faced challenges in the short- and medium-term. Asked by an FGT shareholder whether Fevertree was too ‘fashionable’ and vulnerable to changes in consumer taste, Train replied: ‘A brand of global significance has been established. There is an opportunity to grow that brand equity in Europe and the US.’
But he agreed that ‘Fevertree needs to be about more than tonic’ if it was to continue to succeed, pointing to the growth potential in its ginger ale and soda water products in the US.
Train told investors at FGT’s annual general meeting in London’s Guildhall that he and Lindsell had watched Fevertree for years looking for an opportunity to buy.
‘Having kicked ourselves for not buying it seven years ago then to see the collapse in the share price,’ he said they had to act.
Train declined to say what price he had bought Fevertree but said it was ‘notably under £14’. The shares have continued to fall as covid-19 fears have gripped the market, down 3.9% or 51.5p to £12.63 today.
hTtps://citywire.co.uk/funds-insider/news/do-nothing-train-buys-fevertree-after-six-year-wait/a1329041?re=72341&ea=26664&utm_source=BulkEmail_FundsInsider+Weekend&utm_medium=BulkEmail_FundsInsider+Weekend&;utm_campaign=BulkEmail_FundsInsider+Weekend
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26/2/2020
09:09 | llama1978: Look at it as an opportunity. Flu will be gone by summer, people will make up for it and enjoy themselves! It will cause a slight hit to sales but share price will be significantly up in 12-18 months I am pretty confident of that.
|
21/2/2020
15:05 | riostroy: It is frustrating to see how share price is manipulated by such a low volumes in just seconds.
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21/2/2020
15:02 | riostroy: I bought after November trading update when they lied about future prospects, which they missed in next month. And share price tanked. I am forced holder now - I cannot accept the lose now. It is too much now. I am waiting a recovery, which seems never going to happen.
|
21/1/2020
12:15 | sam_: Fevertree Drinks PLC with EPIC/TICKER (LON:FEVR) had its stock rating noted as ‘Reiterates’ with the recommendation being set at ‘HOLD’ today by analysts at Deutsche Bank.
Fevertree Drinks PLC are listed in the Consumer Goods sector within AIM. Deutsche Bank have set a target price of 1650 GBX on its stock. This is indicating the analyst believes there is a potential upside of 13.0% from today’s opening price of 1460 GBX.
Over the last 30 and 90 trading days the company share price has decreased 690 points and decreased 672 points respectively. The 52 week high for the stock is 3290 GBX while the year low share price is currently 1411 GBX.
https://www.directorstalkinterviews.com/fevertree-drinks-plc-13-potential-upside-indicated-by-deutsche-bank/412803422
|
20/1/2020
10:28 | christh: I see you never change your vulgar language and your profanities!
---------------------------------------------------------------------------------------------------
The share price has been oversold!
The results were known already when Nielsen posted its statistics.
However that was factored in and the fall is overdone.
The figures coming out of the US,Europe ant the rest of the World are quite good.
Still managed a 9.7% increase in earnings, which means the dividend whatever it is will increase.
Quei Serah,serah.
Long term investment it is then!
Hope a bounce from here and who knows Peepsico or Unilever will jump in for a Take over!
|
03/1/2020
08:29 | christh: Just keep shorting and hopefully you burn your breeches!
Fevertree has done exceptionally well.
Trading update will have you run for the woods.
Trading update expected to say a good year here, progress on US and ROW for definite and dividend to be raised again (IMO).
Directors have huge skin in the game here and some of their buys were at prices far North of here.
The update is set for Thursday, January 23 and covers the whole Christmas period.
And it could spark action over the next 3 weeks.
It is followed by the Premins on the year on March 24 but we hopefully see a better price long before that.
share price might run to £30 and beyond.
|
30/10/2019
15:21 | trying2getrichquick: Smithson jumps on the Fevertree bandwagon
By Kristen McGachey.
Fundsmith investment trust has 30 holdings after initiating position in drinks maker
Fundsmith investment trust Smithson has become the latest small-cap manager to buy Fevertree as the drinks business’s share price falls to a more palatable level.
Smithson manager Simon Barnard noted in the July factsheet for the trust that Fevertree shares were down 47% from their 2018 peak due to a lukewarm reception to a trading update. This resulted in “an attractive valuation given our estimation of the business quality and growth prospects for the company,” Barnard said in the trust’s latest update.
Within the investment trust universe, the Independent Investment Trust already holds a 6.7% weighting in Fevertree, while SVM UK Emerging has a 3.8% allocation. Fidelity Investments currently owns the largest stake in the business at 8.4%, while Aberdeen Standard Investments and Morgan Stanley Investments also own 6% each.
Fevertree’s share price has skyrocketed in value since the company’s IPO in November 2014, growing 23 times in under four years from 165p to £39.34 a share in September 2018.
A second chance for investors who missed the boat
The Share Centre investment research analyst Helal Miah viewed the recent volatility in Fevertree’s shares “as a second chance for investors who may have missed the boat a year ago”.
“While we do not have a formal recommendation on the shares, we do believe Fevertree at current prices offers investors good prospects,” he said in an analyst note. “The dividend yield is very modest but the rise in the payment by 23% is encouraging.”
Miah added that following the depreciation in share price, the fizzy drink maker was on “a far more palatable multiple” of 32x price to earnings (P/E) for 2020.
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30/9/2019
22:36 | trying2getrichquick: Fevertree Drinks
Market Cap - UK£2.8b
Last Updated - 2019/09/29 22:01 UTC
Executive Summary
Fevertree Drinks Plc, together with its subsidiaries, develops and supplies premium mixer drinks in the United Kingdom, the United States, Europe, and internationally.
Snowflake
Fundamentals
Flawless balance sheet with solid track record.
Share Price & News
How has Fevertree Drinks's share price performed over time and what events caused price changes?
Latest Share Price and Events
Market Performance
7 Day Return
0.6%
FEVR
2.1%
GB Beverage
0.2%
GB Market
1 Year Return
-32.9%
FEVR
15.7%
GB Beverage
-1.8%
GB Market
Return vs Industry: FEVR underperformed the UK Beverage industry which returned 15.7% over the past year.
Return vs Market: FEVR underperformed the UK Market which returned -1.8% over the past year.
Share holder returns
FEVR Industry Market
7 Day 0.6% 2.1% 0.2%
30 Day 7.1% -4.7% 3.3%
90 Day 4.8% -3.0% -0.4%
1 Year -32.5%-32.9% 18.9%15.7% 2.8%-1.8%
3 Year 153.1%149.6% 62.1%50.3% 21.3%6.8%
5 Year n/a 112.2%85.4% 36.2%7.3%
Price Volatility Vs. Market
Valuation
Is Fevertree Drinks undervalued based on future cash flows and its price relative to the stock market?
Analysis Checks 0/6
44.15x
Price to Earnings (PE) ratio
Intrinsic Value Based on Future Cash Flows
25.8%Overvalued
Current PriceUK£24.21Fair ValueUK£19.2520% UndervaluedAbout Right20% Overvalued
Undervalued: FEVR (£24.21) is trading above our estimate of fair value (£19.25)
Significantly Undervalued: FEVR is trading above our estimate of fair value.
Price Based on Earnings
}}}0x10x20x30x40x50x60x
PE Ratio
company 44.1x
industry 25.2x
market 16x
PE vs Industry: FEVR is poor value based on its PE Ratio (44.1x) compared to the Beverage industry average (25.2x).
PE vs Market: FEVR is poor value based on its PE Ratio (44.1x) compared to the UK market (16x).
Price Based on Expected Growth
}0x1x2x3x4x
PEG Ratio
company 4.2x
Low PEG Ratio: FEVR is poor value based on its PEG Ratio (4.2x)
Price Based on Value of Assets
}}}0x5x10x15x20x
PB Ratio
company 14x
industry 3.6x
market 1.5x
PB vs Industry: FEVR is overvalued based on its PB Ratio (14x) compared to the GB Beverage industry average (3.6x).
Next Steps
Explore potentially undervalued companies in the Food, Beverage & Tobacco industry.
Future Growth
How is Fevertree Drinks expected to perform in the next 1 to 3 years based on estimates from 11 analysts?
Analysis Checks 3/6
10.5%
Forecasted annual earnings growth
Earnings and Revenue Growth Estimates
GBPRevenueCash FlowEarnings
Growth Rates20172018201920202021202220232024£0£500MActualEstimated
Future Annual Growth Analysis
company10.5%industry6.9%
market12.5%
forecast annual earnings growth
company12.3%industry5.6%
market4.1%
forecast annual revenue growth
Earnings vs Savings Rate: FEVR's forecast earnings growth (10.5% per year) is above the savings rate (1.2%).
Earnings vs Market: FEVR's earnings (10.5% per year) are forecast to grow slower than the UK market (12.5% per year).
High Growth Earnings: FEVR's earnings are forecast to grow, but not significantly.
Revenue vs Market: FEVR's revenue (12.3% per year) is forecast to grow faster than the UK market (4.1% per year).
High Growth Revenue: FEVR's revenue (12.3% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Estimates
GBP
20172018201920202021202220232024£0.2£1
Historical Range of past estimates
Analyst's estimate Range of estimates
Future Return on Equity
}}0%10%20%30%40%
Future ROE (3yrs)
company 26.4%
industry 18.1%
High Future ROE: FEVR's Return on Equity is forecast to be high in 3 years time (26.4%)
Past Performance
How has Fevertree Drinks performed over the past 5 years?
Analysis Checks 5/6
48.6%
Historical annual earnings growth
Earnings and Revenue History
GBPRevenueCash FlowEarningsOperating Expenses
Growth Rate20132014201520162017201820192020£-50M£300M
Past Earnings Growth Analysis
company48.6%industry8.6%
market13.4%
past 5 years annual earnings growth
company21.1%industry4.6%
market6.8%
last 1 year earnings growth
Earnings Trend: FEVR's earnings have grown significantly by 48.6% per year over the past 5 years.
Accelerating Growth: FEVR's earnings growth over the past year (21.1%) is below its 5-year average (48.6% per year).
Earnings vs Industry: FEVR earnings growth over the past year (21.1%) exceeded the United Kingdom of Great Britain and Northern Ireland industry 4.6%.
Return on Equity
}}0%10%20%30%40%
ROE
company 31.7%
industry 18.1%
High ROE: FEVR's Return on Equity (31.7%) is considered high.
Return on Assets
}}0%2%4%6%8%10%
ROA
company 26.5%
industry 8.5%
ROA vs Industry: FEVR has a higher Return on Assets than the Beverage industry average last year.
Return on Capital Employed
}}0%10%20%30%
ROCE
last year 38.4%
3 years ago 27.6%
ROCE Improving: FEVR has significantly improved its Return on Capital Employed over the past 3 years.
Financial Health
How is Fevertree Drinks's financial position?
Analysis Checks 5/6
Financial Position Analysis
GBP
20132014201520162017201820192020£0£250MNet worth
GBPShort termLong termNet worth
LiabilitiesAssets
Short Term Liabilities: FEVR's short term assets (£189.9M) exceeds its short term liabilities (£36.7M)
Long Term Liabilities: FEVR's short term assets (£189.9M) exceeds its long term liabilities (£1.5M)
Debt to Equity History and Analysis
GBPDebtNet worth (Equity)Cash
20132014201520162017201820192020£-50M£250M
Debt Level: FEVR is debt free.
Reducing Debt: FEVR currently has no debt however we can't compare to 5 years ago as we have no data for that period.
Debt Coverage: FEVR has no debt, therefore it does not need to be covered by operating cash flow.
Interest Coverage: FEVR has no debt, therefore coverage of interest payments is not a concern.
Balance Sheet
Assets
Cash + Short termInvestmentsReceivablesInventoryPh230;Long term +Other Assets
Liabilities + Equity
EquityDebtAccountsPayableOtherLiabilities
Inventory Level: FEVR has a low level of unsold assets or inventory.
Debt Coverage by Assets: Insufficient data to determine if FEVR's debt is covered by short term assets.
Dividend
What is Fevertree Drinks's current dividend yield, its reliability and sustainability?
Analysis Checks 0/6
0.80%
Expected Dividend Yield
Dividend Yield and Payments Analysis
DPSFEVR DPSFEVR YieldBeverageMarket
201620172018201920202021202220232024£0£0.3
2.1%
1.4%
0.1%
0.6%
Notable Dividend: FEVR's dividend (0.6%%) isn’t notable compared to the bottom 25% of dividend payers in the UK market (1.97%%).
High Dividend: FEVR's dividend (0.6%) is low compared to the top 25% of dividend payers in the UK market (5.47%).
Stable Dividend: FEVR is not paying a notable dividend for the UK market, therefore no need to check if payments are stable.
Growing Dividend: FEVR is not paying a notable dividend for the UK market, therefore no need to check if payments are increasing.
Current Payout to Shareholders
28%Now
Retained byFevertree Drin…Paid to you
Dividend Coverage: FEVR is not paying a notable dividend for .
Future Payout to Shareholders
30%+3 yrs
Retained byFevertree Drin…Paid to you
Future Dividend Coverage: No need to calculate the sustainability of FEVR's dividend in 3 years as they are not forecast to pay a notable one for the UK market.
Management
What is the CEO of Fevertree Drinks's salary, the management and board of directors tenure and is there insider trading?
3.3yrs
Average board tenure
CEO
Tim Warrillow (44yo)
0yrs
Tenure
UK£3,981,000
Compensation
Mr. Timothy Daniel Gray Warrillow, also known as Tim, is a Co-Founder, Chief Executive Officer and Executive Director at Fevertree Drinks Plc. Mr. Warrillow joined a London-based advertising and branding a ...
CEO Compensation Analysis
GBPTotal CompensationSalaryFevertree Drinks EPS
2014201520162017201820192020£0UK£5m
Compensation vs. Market: Tim's total compensation ($USD4.90M) is about average for companies of similar size in the UK market ($USD2.26M).
Compensation vs Earnings: Tim's compensation has increased by more than 20% in the past year.
Board Age and Tenure
3.3yrs
Average Tenure
55yo
Average Age
Experienced Board: FEVR's board of directors are considered experienced (3.3 years average tenure).
Insider Trading
SOLDBOUGHTSold by companiesSold by individualsBought by companiesBought by individuals0-3 months3-6 months6-9 months9-12 months
Insider Buying: FEVR insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
AIM:FEVR Recent Insider Transactions by Companies or IndividualsDate Value Name Entity Role Shares Max Price
16 Aug 19 BuyUK£43,320 Jeff Popkin Individual
2,000 UK£21.66
25 Jul 19 BuyUK£289,561 Kevin Havelock Individual
13,298 UK£21.99
07 Dec 18 BuyUK£67,843 Jeff Popkin Individual
2,933 UK£23.17
11 Oct 18 BuyUK£167,946 Kevin Havelock Individual
5,727 UK£29.55
Ownership Breakdown
General PublicIndividual InsidersPrivate CompaniesInstitutions
Institutions
Private
Companies
Individual
Insiders
General
Public
Management Team
Charles Rolls (62yo)
Co-Founder & Non-Executive Deputy Chairman
Tenure: 0yrs
Tim Warrillow (44yo)
Co-Founder
Tenure: 0yrs
Compensation: UK£3.98m
Andy Branchflower (40yo)
Finance Director
Tenure: 4.9yrs
Compensation: UK£1.92m
Saskia Stoop (35yo)
Head of Marketing
Tenure: 0yrs
Claire Huntingford (38yo)
Head of Supply Chain
Tenure: 0yrs
Charles Gibb
Global Strategy Director & CEO of North American
Tenure: 1.8yrs
Oliver Winters
Communications & IR Director
Tenure: 0yrs
Board Members
Bill Ronald (63yo)
Non-Executive Chairman
Tenure: 6.3yrs
Compensation: UK£125.00k
Coline McConville (55yo)
Independent Non-Executive Director
Tenure: 4.8yrs
Compensation: UK£58.00k
Jeff Popkin (54yo)
Independent Non Executive Director
Tenure: 1.7yrs
Compensation: UK£46.00k
Kevin Havelock (61yo)
Independent Non-executive Director
Tenure: 1.7yrs
Compensation: UK£46.00k
Domenic De Lorenzo (55yo)
Independent Non-Executive Director
Tenure: 1.3yrs
Compensation: UK£30.00k
Charles Rolls (62yo)
Co-Founder & Non-Executive Deputy Chairman
Tenure: 0yrs
Tim Warrillow (44yo)
Co-Founder
Tenure: 0yrs
Compensation: UK£3.98m
Andy Branchflower (40yo)
Finance Director
Tenure: 4.9yrs
Compensation: UK£1.92m
Company Information
Fevertree Drinks Plc's company bio, employee growth, exchange listings and data sources
Key Information
Fevertree Drinks Plc logo
Name: Fevertree Drinks Plc
Ticker: FEVR
Exchange: AIM
Founded: 2013
Industry: Soft Drinks
Sector: Food, Beverage & Tobacco
Market Cap: UK£2.811b
Shares outstanding: 116.13m
Website: hxxps://www.fever-tree.com
Fevertree Drinks Plc
186 -188 Shepherds Bush Road
London
Greater London
W6 7NL
United Kingdom
Listings
Ticker Exchange Primary Security Security Type Country Currency Listed on
FEVR AIM (London Stock Exchange AIM Market) Yes Ordinary Shares GB GBP Nov 2014
FQVT.F OTCPK (Pink Sheets LLC) Yes Ordinary Shares US USD Nov 2014
FV8 DB (Deutsche Boerse AG) Yes Ordinary Shares DE EUR Nov 2014
Biography
Fevertree Drinks Plc, together with its subsidiaries, develops and supplies premium mixer drinks in the United Kingdom, the United States, Europe, and internationally. The company’s products include Indian ...
Company Analysis and Financial Data Status
All financial data provided by Standard & Poor's Capital IQ.Data Last Updated (UTC time)
Company Analysis 2019/09/29 22:01
End of Day Share Price 2019/09/27 00:00
Earnings 2019/06/30
Annual Earnings 2018/12/31
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data.
Credit: Simply Wall Street
|
14/10/2018
01:24 | sogoesit: Excerpt from the 12 October Phil Oakley article re FEVR that i mentioned in my previous post:
"Let’s see how Fevertree measures up against these tests.
Fevertree cash conversion: 2013 2014 2015 2016 2017
Adjusted operating profit 5.0 9.2 17.3 34.4 56.4
Adjusted Ebitda 5.6 10.0 18.2 35.8 58.7
Cash generated from operations -0.5 6.2 12.9 25.0 43.4
Exceptional cash items 2.3 1.1
Adjusted cash generated from operations 1.8 7.3 12.9 25.0 43.4
Op cash as % of op profit 36.3% 79.2% 74.6% 72.6% 76.9%
Op cash as % of Ebitda 32.4% 72.9% 70.9% 69.7% 73.9%
Free cash flow -2.9 3.1 9.7 19.0 32.7
Exceptional cash items 2.3 1.1 0.0 0.0 0.0
Adjusted free cash flow -0.5 4.3 9.7 19.0 32.7
Adjusted profit after tax 7.4 13.9 28.0 46.1
Free cash flow as % of profit after tax 57% 70% 68% 71%
Not great seems to be the answer. Its operating and free cash flows are significantly lower than its profits.
So what is going on here? Are investors to think that Fevertree’s profits are not as high as it says they are?
Fevertree working capital cash flows (£m) 2013 2014 2015 2016 2017
Change in trade and other receivables -3.3 -2.4 -8.4 -13.6 -26.4
Change in inventories -1.0 -1.8 -2.0 -4.1 -2.7
Change in trade and other payables 0.4 1.5 5.1 7.6 13.8
working capital cash flow -3.8 -2.7 -5.3 -10.2 -15.3
2013 2014 2015 2016 2017
Trade & other receivables 6.0 8.4 16.8 30.4 55.6
Revenue 20.6 34.7 59.3 102.2 170.2
% of revenue 29.1% 24.2% 28.3% 29.7% 32.7%
Going back and looking at the cash flow statement, the reason for Fevertree’s poor cash conversion is due to significant cash outflows from working capital – mainly an increase in receivables; invoices unpaid at the end of the year. These receivables represent sales – and the profits from them – that have been booked in the income statement but where the cash has not been received from customers.
Fevertree is a very fast-growing business where it is quite normal to offer customers credit terms in order to grow sales. The question is whether the company is becoming too reliant on credit in order to grow and meet the expectations of investors.
The company is clearly not overtrading – this is when the increases in sales are too fast and put a strain on the company’s finances – but the growth in receivables has been growing faster than sales and now accounts for nearly a third of sales, which is higher than other quoted soft drinks companies (Vimto owner Nichols is the next highest with receivables at 26 per cent of sales).
As long as these receivables turn into cash – and bad debts are not a problem for Fevertree – there is no reason to question Fevertree’s profits in my opinion. That said, for me, it is something that needs watching as extending credit can only go so far in driving a company’s sales growth.
How much is a company investing?
Fevertree capex ratios 2013 2014 2015 2016 2017
Capex 0.2 0.3 0.4 0.8 1.2
Depreciation & Amortisation 0.6 0.8 0.8 1.0 1.1
Operating cash flow -0.5 6.2 12.9 25.0 43.4
Capex/Depreciation 28.5% 33.4% 42.9% 84.9% 110.0%
Capex as % of operating cash flow -33.4% 4.3% 2.8% 3.3% 2.9%
Most companies need to invest in their assets in order to keep their business running smoothly. There are two checks on how much or how little a company is investing that can be worked out from a cash flow statement.
The first one is comparing capex with depreciation. Investing less than depreciation for a period of time can be a sign of underinvestment in a business that will eventually damage its sales and profits. In rarer cases, it can also be a sign of very prudent depreciation policies – and conservatively stated profits.
Fevertree’s investment levels are about in line with its depreciation expense. Given its low investment needs, this is nothing to worry about.
The other measure of investment rate is looking at capex as a percentage of operating cash flow – how much money is reinvested as a percentage of the cash generated from trading. Fevertree has a very low investment rate.
One of the reasons why Fevertree has been such a good investment in recent years is because it hasn’t needed to spend a lot of money on new assets in order to grow. Looking for growing companies with low ongoing investment requirements can be a happy hunting ground for investors.
A check on dividend safety
The biggest reason for a dividend to be cut is a lack of free cash flow to pay it. A very quick and powerful test of dividend safety is comparing a company’s free cash flow with the cost of its annual dividend – known as free cash flow dividend cover. Cover of less than one for a prolonged period of time could be a sign of a company borrowing to pay its dividend, which can’t go on indefinitely.
Fevertree free cash dividend cover (times) 2013 2014 2015 2016 2017
Free cash flow -2.9 3.1 9.7 19.0 32.7
Dividends paid 0.0 0.0 -1.2 -4.4 -8.9
Free cash dividend cover (times) n/a n/a 7.8 4.3 3.7
Fevertree’s current dividend looks very safe and has scope to grow
If you come across a share with a very high dividend yield (say more than 6 per cent) it might be a good idea to check out the free cash dividend cover. High yields usually occur because there are lots of doubts as to whether the dividend can be maintained. If there isn’t enough free cash flow to pay it you might be better off investing your money elsewhere.
Using cash flow to measure financial performance
Fevertree free cash flow margin: 2013 2014 2015 2016 2017
Revenue 20.6 34.7 59.3 102.2 170.2
Free cash flow -2.9 3.1 9.7 19.0 32.7
Free cash flow margin -14.0% 9.0% 16.4% 18.6% 19.2%
A free cash flow margin shows the percentage of a company’s revenues that turns into free cash flow. Fevertree is impressive on this measure with a high and growing free cash flow margin. Anything consistently higher than 15 per cent should be seen as a sign of a very good business.
Another option of calculating cash returns that doesn’t come entirely from numbers in a cash flow statement is something known as the cash return on cash capital invested (CROCCI). It compares a company’s Ebitda with the cash capital invested in the business. It can be used as an alternative to calculating return on capital employed (ROCE), which uses operating profits and capital employed that have both been reduced by a non-cash depreciation expense.
The calculation for Fevertree is shown in the table below. On this basis, its financial performance is very impressive indeed.
Fevertree CROCCI 2013 2014 2015 2016 2017
Adj Ebitda 5.6 10.0 18.2 35.8 58.7
Total assets 57.4 67.3 85.3 118.2 171.8
Accumulated depreciation & amortisation 0.6 1.4 2.8 3.2 4.3
Less:
Non-interest-bearing current liabilities (NIBCL) -3.7 -5.0 -11.2 -20.9 -35.6
Cash capital invested 54.3 63.6 76.9 100.5 140.5
CROCCI 10.4% 15.7% 23.6% 35.7% 41.8%
NIBCL is calculated by taking current liabilities from the balance sheet and taking away any short-term borrowing in that number.
The sources and uses of cash
This isn’t used much, but is a useful way of understanding where a company gets its cash from and what it does with it. It is just another way of looking at cash flows and involves rejigging the cash flow statement. The difference between cash coming in and going out shows the change in the cash during the year.
Fevertree sources & uses of cash (£m) 2013 2014 2015 2016 2017
Sources of cash:
Cash from operations -0.5 6.2 12.9 25.7 43.4
Interest received 0.0 0.0 0.0 0.1 0.1
New loans 50.1 0.0 0.0 0.0 0.0
New equity 0.5 53.4 0.0 0.0 0.2
Total cash in 50.0 59.6 12.9 25.8 43.6
Uses of cash:
Income taxes paid -0.7 -1.3 -2.5 -5.0 -9.4
Capex -0.2 -0.3 -0.4 -0.8 -1.2
Acquisitions -44.2 0.0 0.0 0.0 0.0
Interest paid -1.5 -1.5 -0.3 -0.1 -0.1
Loans repaid -0.2 -50.3 -0.4 0.0 0.0
Share repurchases
Dividends paid -1.2 -4.4 -8.9
Other
Total cash out -46.7 -53.4 -4.9 -10.4 -19.6
Change in cash 3.4 6.2 8.1 15.3 24.0
We can see that since 2013 Fevertree has moved from being a company that got most of its cash from loans and spent it on buying a company to one that gets most of its cash from selling products and using it to pay taxes and dividends.
Using free cash flow to value shares
The free cash flow yield is often used as a way of measuring how cheap or expensive a share is. High yields are seen as a sign of cheapness and vice versa. You can calculate it by comparing the free cash flow with the company’s market capitalisation or by calculating the free cash flow share and dividing that number by the current share price.
Fevertree free cash flow yield 2017 2018F 2019F 2020F
FCF per share(p) 28.2 37.8 48.3 57
Share price(p) 2954 2954 2954 2954
Free cash flow yield 0.95% 1.28% 1.64% 1.93%
Source: SharePad
High quality, fast-growing businesses such as Fevertree are rarely available for a cheap price. Yet, even after a significant share price fall over the past few weeks, Fevertree shares look very expensive on the basis of their current and expected free cash flow yield.
Free cash flow per share is expected to double between 2017 and 2020, but the shares still only offer a free cash flow yield of less than 2 per cent based on 2020 forecasts. In a world of rising interest rates on bonds, that doesn’t look great value unless free cash flow forecasts increase significantly as they have done in the past.
Free cash flow yield is also a popular way of screening for undervalued takeover targets. A free cash flow yield of 10 per cent or more might attract the attention of bargain hunters, providing the free cash flow is sustainable."
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