Key Takeaways:
- The 2-Minute Valuation Model values Celsius Holdings at $44/share in 2 years.
- This implies that the stock could have over 30% upside from its current share price.
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What is the 2-Minute Valuation Model?
There are 3 core factors that drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
The 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized EPS, and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why Celsius Looks Undervalued
Forecast
On Celsius’s Analyst Estimates tab shown below, you can see analysts expect the company to grow revenue at a 14.5% compound annual growth rate over the next 3 years, with normalized earnings per share, or EPS, expected to grow significantly faster driven by rising profit margins:
View Celsius Holdings’ full analyst estimates >>>
For context, over the past 5 years, Celsius’s revenue grew at a 78.6% CAGR.
Valuation Multiple
Celsius currently trades at around $31 per share, which means the stock trades at around 4.5 times next year’s expected revenue and nearly 35 times next year’s expected earnings.
This is a much more reasonable multiple than the stock has seen in the past.
Celsius has averaged a 94x forward P/E multiple over the past 3 years:
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We’ll use a 30x forward P/E ratio in our valuation, since the stock is expected to see about 15% annual revenue growth.
Fair Value
3 years from now, Celsius is expected to reach about $1.48 in normalized EPS. At a 30x NTM P/E multiple, that values Celsius stock in 2 years at $44/share.
The NTM P/E multiple uses the next twelve months’ expected earnings, so a 2-year valuation uses 3-year EPS forecast figures.
With the stock trading at about $31 today, this implies that Celsius could rise 19.1% per year over the next 2 years, or 42% in total, to reach this fair value:
Analysts also think the stock is considerably undervalued.
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Analysts’ Price Target
The consensus analyst price target for Celsius today is about $42 per share, which means analysts think the stock has over 30% upside.
Analysts haven’t always been bearish on Celsius. You can see that analysts thought Celsius was undervalued throughout 2022, but today, they think the stock is at one of its most overvalued points in its publicly traded history:
Analysts’ price targets can suffer from many biases and aren’t always accurate.
Still, looking at analysts’ consensus price targets can be a great way to get a “second opinion” on your own stock valuation.
TIKR Takeaway
Based on the 2-Minute Valuation Model, it looks like Celsius Holdings stock is well undervalued today, and the stock could go up over 40% in the next 2 years.
This is, of course, just a valuation exercise. No one knows where a stock is headed in the short term, and few can predict where a stock is heading in the long term.
Don’t take our word for it—try it out for yourself! Analyze Celsius Holdings or any stock you’re interested in on TIKR today!
The TIKR Terminal offers industry-leading financial data on over 100,000 stocks and was built for investors who think of buying stocks as buying a piece of a business.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. We aim to provide informative and engaging analysis to help empower individuals to make their own investment decisions. Neither TIKR nor our authors hold positions in any of the stocks mentioned in this article. Thank you for reading, and happy investing!
