The past six months have been a windfall for Zevia’s shareholders. The company’s stock price has jumped 119%, hitting $2.08 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy Zevia, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.We’re happy investors have made money, but we don't have much confidence in Zevia. Here are three reasons why ZVIA doesn't excite us and a stock we'd rather own.
Why Is Zevia Not Exciting?
With a primary focus on soda but also a presence in energy drinks and teas, Zevia (NYSE:ZVIA) is a better-for-you beverage company.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Zevia grew its sales at a tepid 5.2% compounded annual growth rate. This fell short of our benchmark for the consumer staples sector. 
2. Less Negotiating Power with Suppliers
Zevia is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from economies of scale and negotiating leverage.
3. Operating Losses Sound the Alarms
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Unprofitable public companies are rare in the defensive consumer staples industry. Unfortunately, Zevia was one of them over the last two years as its high expenses contributed to an average operating margin of negative 16.6%.
Final Judgment
Zevia isn’t a terrible business, but it isn’t one of our top picks. Following the recent rally, the stock trades at $2.08 per share (or 0.7x forward price-to-sales). Regardless of price, the upside isn’t great compared to the potential downside - there are more exciting stocks to buy at the moment. We’d recommend taking a look at Cloudflare, one of our top software picks that could be a home run with edge computing.
Stocks We Like More Than Zevia
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