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⁠Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: A sober valuation analysis on $CELH 🧘🏽‍♂️

•NTM P/E Ratio: 30.45x
•1-Year Mean: 62.14x

•NTM FCF Yield: 2.89%
•1-Year Mean: 1.26%

As you can see, $CELH appears to be trading below fair value

Going forward, investors can expect to receive ~103% MORE in earnings per share & ~129% MORE in FCF per share🧠***

***Keep in mind that this is the case mainly because $CELH traded for a substantial premium for most of the last year (trading between 40x - 98x earnings until last month where its multiple fell below 40x)

Before we get into valuation, let’s take a look at why $CELH is an interesting business

BALANCE SHEET✅
•Cash & Equivalents: $903.21M
•Long-Term Debt: $0

$CELH has an excellent balance sheet & 152x FFO Interest Coverage Ratio

RETURN ON CAPITAL🆗➡️✅
•2020: 7.5%
•2021: (1.8%)
•2022: (17.6%)
•2023: 24.4%
•LTM: 26.9%

RETURN ON EQUITY🆗➡️✅
•2020: 10.2%
•2021: 2.5%
•2022: (34.6%)
•2023: 23.2%
•LTM: 26.6%

$CELH return metrics are ok, although more recently trending in the right direction

REVENUES✅
•2018: $52.60M
•2023: $1.31B
•CAGR: 90.45

FREE CASH FLOW✅
•2018: ($11.76M)
•2023: 123.79M

NORMALIZED EPS✅
•2018: ($0.07)
•2023: $0.79

SHARE BUYBACKS❌
•2018 Shares Outstanding: 150.15M
•LTM Shares Outstanding: 237.46M

By increasing its shares outstanding ~58%, $CELH diluted its EPS by ~37% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 50.4%
•LTM Operating Margins: 22.4%
•LTM Net Income Margins: 16.2%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~103% MORE in EPS & ~129% MORE FCF per share

Using Benjamin Graham’s 2G rule of thumb, $CELH has to grow earnings at a 15.23% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be slightly more than the (12.09%) required growth rate:

2024E: $1.01 (14.0% YoY) *FY Dec
2025E: $1.23 (22.8% YoY)
2026E: $1.57 (10.3% YoY)

***2027E: $1.77 (14.0% YoY)

$CELH has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $CELH ends 2026 with $1.57 in EPS & see its CAGR potential assuming different multiples

32 P/E: $50.24💵 … ~20.6% CAGR

30x P/E: $47.10💵 … ~17.3% CAGR

28x P/E: $43.69💵 … ~13.6% CAGR

26x P/E: $40.82💵 … ~10.3% CAGR

As you can see, we’d have to assume >26x earnings for $CELH to have double digit CAGR potential (a multiple that appears justified by its growth rate)***

***However, this is where it’s wise to demonstrate some caution — I’d rather assume a more conservative multiple & be pleasantly surprised with “multiple expansion” given that growth is slowing & any sign of a sustained downward revision in growth can re-rate $CELH multiple rather quickly

Today at $32.40💵 $CELH appears to be decent consideration for investment (although with some risks & a high degree of uncertainty)

Yet, I'm unlikely to invest in $CELH due to its lack of a strong competitive moat and its high level of uncertainty

#stocks #investing
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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