The various flavors do not contain high-fructose corn syrup, and the sugar-free versions do not contain aspartame (Nutrasweet) or saccharine. The sodas can be made with fresh juices and other natural ingredients.

The trend among foodies is to eat food that is as little processed as possible. Homogenous Coca-Cola is the (beverage) epitome of processed food, perceived as overpackaged, loaded with chemicals and laden with nasty preservatives. Soda made fresh, by Mom, at home is exactly the same as what you can buy from Coke, but with a fresh lemon garnish and purified water ice cubes, it seems homier and healthier.

It's convenient. Lugging around a case of Diet Coke is a chore, especially for customers in urban markets. SodaStream not only is less to carry, but it takes up less space in the kitchen and the refrigerator. And, frankly, it's cost-competitive. Water comes out of the tap, CO2 cartridges cost about $30 for 60 liters of soda and flavoring costs $4.99 for 500mL, which makes about 12 liters. That puts the 2-liter cost of the soda at $2.16, excluding the machine, which is comparable to other mainstream sodas and cheaper than premium options.      

The company might have summed it up best in an SEC filing: "We believe that demand for our products will continue to benefit from several long-term trends in global consumer behavior. These trends include the green movement and the popularity of products perceived to be better for the environment, the increased importance of value and savings in consumers' lifestyle and purchase decisions and increased demand for food and beverage products that promote health and wellness."

This has meant good things for the company's revenue, which has increased an estimated 151.3% since the year ended Dec. 31, 2007. Not only is growth steady, but the company is already resolutely profitable, with a margin of 6.0% in 2010 and 9.9% in 2011. Those are estimable results in a very tough industry. Pepsi earns a net 7%, Coke about 16%.

The strategy to grow is solid: Expand its retail footprint geographically across a variety of price points and functionally own the do-it-yourself soda market, then expand into office systems and food service.

That, to my mind's eye, is the money shot.

I've tried SodaStream products, and they're good, at least as good as the other stuff that is out there, but add booze into the mix and you might just have The Real Thing. Restaurants live and die on high-margin alcohol sales, and customized boozy sodas might be a nice way to augment the till behind the bar.

I like this product. I like that the company is profitable. I like its prospects for growth, and I like that it is riding a pair of trends -- wellness and the environment -- that I think have real legs as consumer movements. I also like that the company, valued at about $808 million, has a lot of room to grow.

Risks to Consider: SodaStream is still growing, and it's not inconceivable that it'll experience some growing pains along the way. The stock can be a bit volatile sometimes, so it's important that you be able to stomach the day-to-day swings, keeping in mind that this company is capable of big things.

Action to Take --> You may want to wait to buy this stock on any pullbacks, but I think shares are a good "buy" at their current level for aggressive growth investors.

--Andy Obermueller

 

This article originally appeared on StreetAuthority
Author: Andy Obermueller