NEW YORK (TheStreet) -- What can be cheaper, more convenient and better for the planet than making your favorite soda at home?Sodastream International ( SODA) is the answer. This company is a manufacturer of home beverage carbonation systems, which transforms water into soft drinks/sparkling water. Could this company be a threat to Big Soda including Coca Cola ( KO), Pepsi ( PEP), Dr. Pepper ( DPS) and the other soda companies? It must be since a report in the Calcalist, an Israeli financial newspaper, on Thursday said Pepsi is talking about buying Sodastream for $2 billion. Pepsi denied the report to Reuters. SODA recently rose over 5% to $73 on the news. What makes Sodastream a product that would draw the interest of a Pepsi? I have a Sodastream system at my office and I have one at home so I can tell you -- convenience. It just seems that whenever you're really feeling like having a nice cold soda, you're always out. Next comes the trip to the grocer, standing in line, lugging the bottles home and waiting for them to get cold. But if you have a Sodastream system in your home and/or office, you can choose your degree of carbonation and syrup based on your preference. Sodastream has dozens of popular flavors, both regular and diet, and it is adding new flavors all the time. Sodastream is currently a $1.45 billion dollar company, and it's really starting to take off again.
You could make a single cup of coffee without having to go to an actual store, wait in a line, fight for a parking spot, etc. The stock was trading at $41 at the time. The stock hit $116 seven months later. It was one of the biggest winners of all time in the market. Also consider that Green Mountain was at one time a $1 stock. Well, I think that Sodastream has a similar model to Green Mountain Coffee. While I love stock performance, I also demand value in the stocks that I buy. I have seen too many high fliers over the years get their wings clipped because of high valuations. Let's take a look at Sodastream's current valuation.
It has been one of the fastest-growing companies from an earnings standpoint in the entire market. This is also one of the strongest growth stocks going forward in the market. SODA is currently trading at 21.8 times forward earnings. This means SODA is still trading at a discount to its growth rate. It has a PEG ratio of 0.89. When I take the current earnings of SODA, carry them at a 25% rate over the next five years and apply a multiple that I think is appropriate, I come up with a target price of $126. The company is currently trading at $70 dollars. Therefore, I think there is lots of upside potential. I require three things in stocks before I buy them: Performance, value and a healthy stock chart. Let's next take a look at a one-year chart of the shares: