Down 70%, is Fevertree Drinks a share to consider buying at 815p?
With the ISA deadline fast approaching, many investors will be hunting for shares to buy. And the first port of call for most will be the FTSE 100 and FTSE 250.
However, there are some quality growth companies listed on the Alternative Investment Market (AIM). One of them is Fevertree Drinks (LSE: FEVR), the premium mixers firm.
Yet despite having an upmarket brand and large portfolio that includes tonic waters, ginger ales, and soft drinks, the Fevertree share price is down 70% since late 2021. It’s fallen roughly 15% since the end of February.
Is there a dip-buying opportunity worth assessing here for long-term investors?
Energy shocks
Over the past few years, the company has been hit by pressure on disposable incomes and significant cost inflation. Because its drinks came mainly in swanky glass bottles, it was hit hard when shipping and energy costs related to glass-making went through the roof in 2022.
This helps explain why the stock has fallen sharply since the Iran conflict started at the end of February. It has sparked another energy crisis, which obviously isn’t great for manufacturers or consumers. It’s an ongoing risk.
However, it’s worth pointing out that the company is in a better position this time round. Nowadays, 45% of revenue comes from non-tonic drinks, including more cans. And 2022 led it to adopt energy and raw material hedging, meaning itâs less immediately exposed.
Positive report
Today (24 March), Fevertree reported its preliminary 2025 results, and the market liked what it saw, sending the stock up 8% to 815p.
Adjusted revenue rose 4% at constant currency to £372.7m, accelerating to 5% in the second half. This included 6% sales growth in the US, its most important market, and 22% growth in its Rest of the World segment. The brand’s seeing strong sales in Australia, New Zealand, and Canada.
Unfortunately, UK revenue dipped 2%, with on-trade (bars, restaurants, hotels, and pubs) falling 9%. Fevertree said higher labour costs, duty increases, and ongoing discretionary spending pressure weighed on spirits volumes, and by extension mixer demand.Â
Adjusted EBITDA fell 16% to £45.2m, but this was in line with previous guidance after excluding £2.8m set aside for a packaging tax it’s challenging in court. Profitability was impacted as it moves to a profit-sharing arrangement with beer giant Molson Coors in the US.
The brand is targeting a wider range of adult socialising occasions, both alcoholic and non-alcoholic. Its ginger beer drink is going down a treat, and it returned to TV advertising across several markets.
The dividend increased by 2%, putting the yield at 2.1%, and a £30m share buyback is ongoing.
One to consider?
At first glance, the stock looks expensive at 29 times forward earnings. However, the Molson Coors partnership is key here, with products now embedded across approximately 400 of its US regional distributors.
The brand is set to receive further US marketing investment in 2026 and beyond. As such, Fevertree sees “a clear pathway to accelerating revenue growth in our largest market“.
And as production moves stateside over the medium term, management says this will “unlock significant incremental US profitability“.
Five years from now, once the Molson Coors partnership is fully operational, Fevertree should be significantly more profitable than today. This makes the stock worth considering, in my view.
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Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Fevertree Drinks Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
