Over the past six months, Celsius’s stock price fell to $50.70. Shareholders have lost 6.1% of their capital, which is disappointing considering the S&P 500 has climbed by 6.6%. This might have investors contemplating their next move.

Given the weaker price action, is this a buying opportunity for CELH? Find out in our full research report, it’s free.

Why Does Celsius Spark Debate?

With its proprietary MetaPlus formula as the basis for key products, Celsius (NASDAQ: CELH) offers energy drinks that feature natural ingredients to help in fitness and weight management.

Two Things to Like:

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Celsius’s 54.2% annualized revenue growth over the last three years was incredible. Its growth surpassed the average consumer staples company and shows its offerings resonate with customers.

2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Celsius has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 19.8% over the last two years.

One Reason to be Careful:

Shrinking Operating Margin

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.

Looking at the trend in its profitability, Celsius’s operating margin decreased by 12.5 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 4.5%.

Final Judgment

Celsius’s merits more than compensate for its flaws. With the recent decline, the stock trades at 33.5× forward P/E (or $50.70 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.

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