I'm not sure if this had been brought up in previous earnings calls, but I have seen Celsius in China, so they have a market there, too. That being said, in my local Chinese supermarket, Monster are front and centre, you cannot miss them; they are in the drinks aisle, they are in the fridges dotted around the supermarket, and they are in a large stand before the checkouts, and in small fridges *at* the checkout. I found Celsius by accident in one of the drinks aisles, but only because I was looking for a Gatorade. Now, this isn't to say anything bad about Celsius, but they are up against a juggernaut. Their brand is also a little bland. Is it water, is it fruit, it's not clear at a glance. Red Bull has extreme sports, Monster has gaming and an element of the fitness world. Celsius has what? It really needs work in this area. Unrelated, but I'm a little surprised that Red Bull is so high when you can buy generic supermarket brand alternatives for a quarter of the price. Part of Monster's strength is the abundance of flavours, especially their sugar free options, so I'm a little shocked that one-flavour RB dominates.
I saw it also in Saudi Arabia (in more than occasion). Also, If I remember correctly, I saw a comment for someone saw it in Holland. This worries me as if they have already expanded to some countries. This will further limit their growth horizon.
Great video and analysis. One thing I don't understand are your free cash flow numbers. You have CELH doing $174m FCF next year but according to my data CELH has already done $245m FCF over the last 12 months. That is CFO minus CAPEX. So I feel your FCF numbers are far too conservative?
Hi there, thank you for your question. There are two reasons for that: 1. The starting point of the FCF that I use is operating profit. This means, I also take the share-based expense into account, which isn't in the operating cash flow. This is my approach to include the dilution that arises from that. 2. If you have a look at the operating cash flow, you'll notice a lot of different lines. One of them, for example, is "Accrued promotional allowance". Only in H1-2024, the liability for it increased by $57m, hence, there was no cash outflow for it, but there will be in the coming quarters. Another one, is inventories. This decreased during H1-2024 by $34m (impacting the operating cash flow in the other direction). However, if the company is expected to grow, it isn't possible to do so by decreasing inventory. So, based on my analysis, the last twelve months aren't representative of the long-term cash flow potential, due to these events, that will have opposite impact in the years to come. I hope this helps!
@@kostadin_ristovski Ok that makes sense thank you. Don't you think the reinvestment amount is too high? You have $118m next year, Celsius total CAPEX over the last 12 months is only $24 million.
@@IntoWhite The reinvestment in my case, includes capex + increase in working capital (such as inventories, receivables, etc.). This is based on "Sales/capital ratio", which gives an idea of how much capital is required, for each $1 of sales. In this case, the ratio is 3, meaning the company needs to invest $1 to support $3 in sales. If the sales grow by $3,000, then $1,000 investment is required, etc.
@@leonardoghini1782 I don't focus on the price solely. In the past, there have been a lot of discounts on Celsius products. That isn't great and it could be due to the high supply of its products into the market. I'd like to see some normalization of that before I open a position.
Didn't know PEP is a key player :) Plugged in some numbers on my side, 30% growth next year, 25% for the 4 years after that, converging on a terminal rate in Y-10. End up with revenues of $8B Assume EBIT reaches 23%, I get an intrinsic value of 12B by using an initial 10% discount. Seems the company is trading at a slight premium, but the key question to answer is HOW will Celsius get from $1.4B to $8B in sales. I have seen optimistic growth assumptions with SAM before and it didn't end well. Again, answering the HOW is key for Celsius - I'm not saying it won't grow, I just lack the info to make a judgement. Great video, thank you!
great video! I'd love more update videos on CELH.
I like Celcius at its current valuation of $38 per share. Great analysis, thanks!
Thanks a lot for the informative video
My pleasure!
thank you for sharing. i hope u do revisit the company again in the future
I'm not sure if this had been brought up in previous earnings calls, but I have seen Celsius in China, so they have a market there, too. That being said, in my local Chinese supermarket, Monster are front and centre, you cannot miss them; they are in the drinks aisle, they are in the fridges dotted around the supermarket, and they are in a large stand before the checkouts, and in small fridges *at* the checkout. I found Celsius by accident in one of the drinks aisles, but only because I was looking for a Gatorade.
Now, this isn't to say anything bad about Celsius, but they are up against a juggernaut. Their brand is also a little bland. Is it water, is it fruit, it's not clear at a glance. Red Bull has extreme sports, Monster has gaming and an element of the fitness world. Celsius has what? It really needs work in this area.
Unrelated, but I'm a little surprised that Red Bull is so high when you can buy generic supermarket brand alternatives for a quarter of the price. Part of Monster's strength is the abundance of flavours, especially their sugar free options, so I'm a little shocked that one-flavour RB dominates.
Thank you for sharing your experience. Also, thank you for sharing your thoughts, those are all very good points.
I saw it also in Saudi Arabia (in more than occasion).
Also, If I remember correctly, I saw a comment for someone saw it in Holland.
This worries me as if they have already expanded to some countries. This will further limit their growth horizon.
Great video and analysis. One thing I don't understand are your free cash flow numbers. You have CELH doing $174m FCF next year but according to my data CELH has already done $245m FCF over the last 12 months. That is CFO minus CAPEX. So I feel your FCF numbers are far too conservative?
Hi there, thank you for your question. There are two reasons for that:
1. The starting point of the FCF that I use is operating profit. This means, I also take the share-based expense into account, which isn't in the operating cash flow. This is my approach to include the dilution that arises from that.
2. If you have a look at the operating cash flow, you'll notice a lot of different lines. One of them, for example, is "Accrued promotional allowance". Only in H1-2024, the liability for it increased by $57m, hence, there was no cash outflow for it, but there will be in the coming quarters. Another one, is inventories. This decreased during H1-2024 by $34m (impacting the operating cash flow in the other direction). However, if the company is expected to grow, it isn't possible to do so by decreasing inventory. So, based on my analysis, the last twelve months aren't representative of the long-term cash flow potential, due to these events, that will have opposite impact in the years to come.
I hope this helps!
@@kostadin_ristovski Ok that makes sense thank you. Don't you think the reinvestment amount is too high? You have $118m next year, Celsius total CAPEX over the last 12 months is only $24 million.
@@IntoWhite The reinvestment in my case, includes capex + increase in working capital (such as inventories, receivables, etc.).
This is based on "Sales/capital ratio", which gives an idea of how much capital is required, for each $1 of sales. In this case, the ratio is 3, meaning the company needs to invest $1 to support $3 in sales. If the sales grow by $3,000, then $1,000 investment is required, etc.
Добър анализ,друже . Поздрав от бугарин живеещ во USA.
Do you think now will be the best time to purchase?
I have no idea when is the best time to purchase share in any company. I have no expeirence nor intentions to time the market.
@@kostadin_ristovski I meant now that the price is around $31, based on your calculations is it undervalued with enough margin of safety?
Did you buy the stock?
@@leonardoghini1782 Nope, not yet.
@@kostadin_ristovski At what price would you feel there is a sufficient margin of safety?
@@leonardoghini1782 I don't focus on the price solely. In the past, there have been a lot of discounts on Celsius products. That isn't great and it could be due to the high supply of its products into the market. I'd like to see some normalization of that before I open a position.
@@kostadin_ristovskiunderstood, thank you for the answer
Didn't know PEP is a key player :)
Plugged in some numbers on my side, 30% growth next year, 25% for the 4 years after that, converging on a terminal rate in Y-10. End up with revenues of $8B
Assume EBIT reaches 23%, I get an intrinsic value of 12B by using an initial 10% discount.
Seems the company is trading at a slight premium, but the key question to answer is HOW will Celsius get from $1.4B to $8B in sales. I have seen optimistic growth assumptions with SAM before and it didn't end well. Again, answering the HOW is key for Celsius - I'm not saying it won't grow, I just lack the info to make a judgement.
Great video, thank you!
Glad you enjoyed the video Goran. Indeed, there's a lot of uncertainty and the future growth is the key variable.
Great video, as usual!
@@leonardoghini1782 Thank you!
If they go for international expansion, bye bye margin, but quadrupling in 10 years is not a small fit.