Why National Beverage stock is drawing attention

National Beverage (FIZZ) is back on investors’ radar after a recent share price move, with returns over the past month and past 3 months prompting closer scrutiny of its fundamentals and valuation.

At a recent share price of US$37.24, the stock has a 1 month share price return of 7.91% and a year to date share price return of 17.62%, yet the 1 year total shareholder return is down 16.95%. This suggests short term momentum is picking up while longer term holders have had a tougher run.

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With National Beverage trading at US$37.24 against an analyst price target of US$35 and an estimated intrinsic value discount of about 11%, you have to ask: is this a genuine opening or is the market already pricing in future growth?

Price-to-Earnings of 18.5x: Is it justified?

National Beverage trades on a P/E of 18.5x, which screens as good value against similar peers yet slightly expensive against the broader global beverage group at the latest close of $37.24.

The P/E ratio compares the share price with earnings per share, so it reflects how much investors are currently paying for each dollar of net income. For a beverage company with US$1.20b in revenue and US$188.09m in net income, P/E helps you gauge how the market is weighing its earnings profile against other options in the sector.

Simply Wall St flags FIZZ as good value relative to its peer average P/E of 67.8x, which suggests the stock is priced more conservatively than many close comparables. At the same time, the P/E sits slightly above the Global Beverage industry average of 17.6x, which implies investors are paying a modest premium compared to the wider group despite the company underperforming both the US Beverage industry and the US market over the past year.

Result: Price-to-Earnings of 18.5x (ABOUT RIGHT)

However, you still need to weigh softer 1 year and multi year shareholder returns against the single product category focus and reliance on US$1.20b in domestic revenue.

Another view: DCF suggests more upside

The P/E points to National Beverage being roughly fairly priced, but our DCF model comes at it differently. With the stock at $37.24 and the SWS DCF model indicating fair value of $41.71, the shares screen as about 11% undervalued. Which signal do you rely on more, the P/E or the DCF model?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out National Beverage for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 46 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Curious whether the mix of fair value signals and recent price moves really suits your portfolio and time horizon? Take a closer look at the full breakdown of the company’s upsides by checking the 2 key rewards

Looking for more investment ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.