Fevertree Drinks Share Discussion Threads

[sogoesit] 10/6/2017 17:25

Indeed, apad, you are right. I said that that was where the IP (Intellectual Property) value resides. Without the fundamental taste ingredient or difference there would be no (tangible) value!
The matrix of differentiation has many axes to it.

[apad] 10/6/2017 17:20

Agreed on the need to differentiate and advertise - create status.
Fentimens has been around for a long time, without FEVR's success

My point is that the taste issue is real.

We did a blind tasting and people were not much bothered by the brand of gin, but nearly everyone rejected the Schweppes tonic.

apad

[sogoesit] 10/6/2017 17:15

Yes, there's an argument that physical taste is the main differentiator here and a differentiator none-the-less.
If they had just believed in the taste issue they could've just gone with competing on price with Schhh. But there appears to me to have been a conscious decision to "premiumise" and charge for that in their marketing strategy.

I've discussed the notion of quinine "addiction" with a friend from Africa who stopped drinking G&T once the quinine had disappeared.
However, "taste" is also a matter of style, if there is disposable income.... Why do they emboss their bottles?
Fascinating!

[apad] 10/6/2017 17:09

"Essentially it is an IP Luxury "Brand" company like Burberry or Chanel, if you like, where the IP is the flavour ingredient. The major expense, or incremental expense/investment, is in marketing; now into overseas markets and "dark spirits".
This is a classic business case of a differentiation strategy and destabilisation of an existing market."

That's a style argument.
I met an old friend in a supermarket with a load of Fever-Tree tonic and she was talking about the taste, not the style.

I bought FEVR shares when my wife and a friend were paying more for the tonic than the gin in an hotel. Mind you that same hotel is now selling Fentimens!

apad

[sogoesit] 10/6/2017 17:03

True... hence the "differentiation strategy".
Yes, there is no allusion in the sales make-up of who drinks these "mixers" without alcohol.
I buy Madagascan Cola and drink it with lime. I don't buy or drink Coke or Pepsi.

[apad] 10/6/2017 17:01

.....except that folks have found that the reason they were flooding gin and tonic with ice and lemon was to take away the taste of aspartamine.
Madagascan cola is drinkable.
In other words, it's not just another style of handbag, the market dominators had left a real space in the market by reducing the quality of their product.
apad

[henchard] 10/6/2017 15:05

From a little more optimistic angle:

Looking through my notes, I see that this time last year the consensus EPS forecast for 2016 was 16.5p. FEVR ended up doing 23.86p, so exceeded expectations by near to 45%.

A repeat of that level of beat this year would see the current consensus of 27.68p turn out at around 40p. That would give a P/E of 43, year-on-year EPS growth of 67% and an attractive PEG of 0.64.

I still don't really understand why analysts are forecasting such a marked deceleration of EPS growth this year. Revenue growth slowing somewhat is one part of the equation but it also looks like there's an expectation of a lower pre-tax profit margin this year than last.

Has anyone seen a broker note? Or know if FEVR is planning to hike capex, marketing spend or any other costs that might account for the forecast slow-down in bottom-line growth?

[henchard] 10/6/2017 13:48

DiscoDave4

"growth is definitely not going to have gone from 106% to 16%."

I do find it very hard to see why the consensus is for growth to decelerate that much in 2017. Even the most bullish analyst has growth moderating markedly to 22.5%.

I'm expecting FEVR to beat forecasts but, as you say, by how much is the big question. As we're getting on for halfway through the year and forecasts have already been upgraded since the AGM statement, I don't think there's a high likelihood of a huge beat to 35.4p or more. Just my view of course. The market seems to disagree with me and to be pricing the stock to deliver forecast-walloping results.

[discodave4] 10/6/2017 12:44

Henchard"I could see FEVR beating EPS forecasts but not to the extent of 35.4p or higher."Why not? They consistently exceed forecasts, why not 48p eps?, that's the million dollar question.........one things certain though IMO and that is that growth is definitely not going to have gone from 106% to 16%.DD

[ccr1958] 10/6/2017 12:29

All I know is when this dips below 1700 .I buy and it serves me well of course you boys may prove me wrong in time ..

[christh] 10/6/2017 12:20

One thing is agreed by all: It is a growth stock, the trend is upwards and the
results way ahead of expectations.

Hence £20 by July 24 - results day is a good indicator.

[henchard] 10/6/2017 12:13

Here are some actual numbers for 2016 and forecast numbers for 2017 and 2018 (based on the current share price of 1,714p):

..........2016.....2017.....2018
EPS.......23.86p...27.68p...31.06p
Growth....106.2%...16.0%....12.2%
P/E.......71.8x....61.9x....55.2x

Surely the shares are way too high at these P/Es for the forecast growth. The PEG ratio for 2017 is 3.9.

For the PEG to get to the "fair value" benchmark of 1 (let alone a "growth-at-a-reasonable-price" level of below 1) FEVR would have to do EPS of 35.4p in 2017, which is 28% higher than the current consensus and 22% higher than the most bullish analyst, who's forecasting 29p EPS according to the FT.

I could see FEVR beating EPS forecasts but not to the extent of 35.4p or higher.

The alternative, of course, is that the share price would have to fall significantly for the valuation to become attractive.

[christh] 10/6/2017 11:53

Sogoesit,

utter rubish.
Read the Slater " Zulu principle" and "Beyond the Zulu principle".

They are eye openners.
It talks about growth companies.
If the trend is up, follow it, " let the trend be your friend".

[sogoesit] 10/6/2017 11:23

For me, the longer term daily eod chart gives current support at 1680 (intraday)/1700 (eod). There is an upper descending triangle line to this horizontal support line whose apex should meet early July. I use Marber's rule to only count 3% moves on a daily eod close as significant/confirmation from the break line... but ignore it from time to time!
This pattern has repeated itself several times since Feb 2017.

On a valuation basis, my forecast high thirties for year end 2017 means that the P/E being paid is now around 40. But, if they exceed expectations, then that is low and we could see my target of £20 being moved to in due course.
GLA

[sogoesit] 10/6/2017 11:06

Thanks bamboo; brilliant!

Your ascending triangle has been working well. I've used it to the upside.
Although out of cash for the time being - like ccr I sold down some Fevr to raise cash for Boo - I have also now re-purchased at about 1700.
Triangles are, "of course" (?), continuation patterns. Marber, see below, says "this pattern signifies indecision". However, in a bullish share chart I use it as an indication for the upside.

Will be interesting to see how the Falling Wedge works out, especially as a warning to the upside/breakout. I studied "Marber on Markets" (by Brian Marber). He has this to say about the falling wedge:
"... illustrates that it is the down-thrusts that are becoming progressively weaker."
and
"If the down trend line is broken by an advance 3% above it at any close, do nothing except watch and wait because what tends to follow is a rounding bottom... which may take a long time to form."

Marber is a long term, daily, eod, closes chartist and I know you are shorter term but in terms of logic these things should be scaleable; just getting the time scale right, I guess.

[christh] 10/6/2017 10:22

You are all becoming too technical and drawn away from the fundementals.
The revenue as stated is ahead of expectations and may be tripled like previous
times.
The expansion, the product demand and recent contracts will and should propel this to £20 and higher.
The company is well run and well deserved all the success.
I will be looking at £18 sooner than later and looking forward to the results.
Might have a run to the results which we already know they will be good, so make your own assumptions.

Only the thought that Diageo is lurking to bounce for a bid frightens me as this
gem will be swallowed by a megabeast.
I am sure as many investment journalists have said that "diageo will probably make a bid for this quality company".
The term "grow organically or grow by aquisition" applies here for Diageo.

[ccr1958] 10/6/2017 09:52

Thx bamboo, if it goes any where near 1650p I will be loading up again... sold a few last week I felt I was overloaded ..

[bamboo2] 10/6/2017 09:23

Sogo, yesterdays close bang on the Ascending Triangle lower trendline. Shame share price couldn't end the week in a more conclusive fashion.

Just started monitoring a third concurrent pattern, a Falling Wedge, which has its apex approx the same day as the AT, Fr 16th June or more likely Mon 19th June, which is a potential turn day. The lower trendline of this FW is the neckline of another small H&S. Historical support 1650.

[sogoesit] 10/6/2017 01:57

IC view of 09 June on Rolls' recent share sale.
Apparently, the price is "unfair". Go figure!!

"Fevertree's shares have continued to trend upwards since it listed on Aim in 2014, and the stock currently trades around 1,699p - well ahead of what was paid by institutional investors who took the chance to top up on discounted shares. But for private investors, a lofty 58 times earnings price tag hardly seems fair against rivals like Britvic and Nichols, which trade at 14 times and 23 times forward earnings respectively. Hold."

[sogoesit] 09/6/2017 16:52

Lol @ wetdream.
Yes, BOO, a perfectly suitable stock for an Insane Investor!
Still in here, tho ;-)

BTW, personally I value bamboo's insights on short term direction for the share.
(Note the words "short term").
It helps me identify good entry points for accumulating and seeing the short term upside. Although I'm a longer term investor a short term view, matched to my longer term targets, are very very useful for entry and exit points. Anyway, this is his thread ;-)!
I also object to meaningless ramping so have christh filtered.

Good weekend all!

[wetdream] 09/6/2017 16:21

I'd guess that plenty of FEVR 'invesors' have now switched to BOO, if they hadn't already, where the PE's even more mental than here!

[christh] 09/6/2017 16:00

panic investor,

don't panic mr mainwaring

[panic investor] 09/6/2017 15:41

Thats a little harsh on Bamboo I think, he definitely doesn't de-ramp stocks.

Always good information imho