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Deutsche Bank expects Fevertree’s growth to lose its fizz in coming years

“After 4 years of c60% sales and 70% EBIT CAGR (2014-18e), we expect the pace of growth to slow over the medium term”
Fevertree is moving into the US, which analysts think could be a lucrative move

Deutsche Bank reckons there is still “plenty of headroom for growth” for Fevertree Drinks PLC (LON:FEVR), although it has its doubts as to whether the posh tonic maker can sustain the kind of growth it has achieved in recent years.

The £3bn AIM company has enjoyed a strong run since it listed in November 2014 on the back of consistent outperformance, sending its stock jumping more than 20-fold over that time.

READ: Fevertree founder sells off another slug of shares

But shares have lost almost a quarter of their value over the past month, with City traders stating that highly-priced, high growth stocks like Fevertree are the first to be dumped during a global market sell-off.

Deutsche analysts think the sell-off has brought the stock down to earth and closer to where it should be, kicking off their coverage with a ‘hold’ recommendation and 3,000p price target, marginally above the current price of 2,905p.

“Following the recent sell-off, we believe the valuation now better reflects Fever- Tree's growth prospects and believe the shares trade close to fair value,” read Wednesday’s note to clients.

“No doubt, there is still plenty of headroom for growth in the premium mixers market and for Fever-Tree, as it expands internationally. However, after 4 years of c60% sales and 70% EBIT CAGR (2014-18e), we expect the pace of growth to slow over the medium term.”

Deutsche is now guiding for sales to grow at an average of 17% and underlying earnings at 15% over the next four years.

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