Fevertree (FEVR) loses a little fizz due to poor UK weather

With the UK market quite saturated, the brand is struggling to find new customers.

Article updated: 23 July 2019 11:00am Author: Helal Miah

  • Revenue growth of 13% indicates a slowing rate of expansion.
  • There are some encouraging signs particularly in the US with distribution gains and operational progress.
  • We don’t hold a formal recommendation on the shares, but believe current valuations may offer investors a second chance.

Fevertree, a former darling of the stock market and a popular share amongst retail investors, seems to have lost even more fizz from this morning’s trading update. The shares have declined by almost 50% from their peak value, losing another 5% or so today. Revenues for the first half grew by 13% to £117.3m while the EBITDA rose by just 8% to £36.7m, indicating a fairly dramatic slowing of the pace by its own standards. The company has not been immune to issues affecting many other companies including the wetter start to the current summer season. It is also finding it increasingly difficult to find new customers in bars, pubs and supermarkets as the UK market appears to be quite saturated.

However, the good news for investors is the growth does not stop, especially in the international markets with US market share set to continue momentum from new distribution channels. Exposure to Australia and Canada and expansion of their product base, into long mixed drinks, should help the company gather some momentum.

While we do not have a formal recommendation on the shares, we do believe Fevertree, at current prices, offers investors good prospects. The dividend yield is very modest but the rise in the payment by 23% is encouraging. It also trades at a 2020 P/E ratio on 32x, a far more palatable multiple than a year ago. We view it as a second chance for investors who may have missed the boat a year ago.

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All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment.