Over the past six months, Vita Coco has been a great trade, beating the S&P 500 by 12.5%. Its stock price has climbed to $67.01, representing a healthy 21.5% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is it too late to buy COCO? Find out in our full research report, it’s free.
Why Is COCO a Good Business?
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ: COCO) offers coconut water products that are a natural way to quench thirst.
1. Elevated Demand Drives Higher Sales Volumes
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Vita Coco’s average quarterly volume growth of 13.8% over the last two years has beaten the competition by a long shot. This is great because companies with significant volume growth are needles in a haystack in the stable consumer staples sector. 
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Vita Coco’s EPS grew at 52.4% compounded annual growth rate over the last three years, higher than its 14.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Vita Coco’s five-year average ROIC was 37.2%, placing it among the best consumer staples companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons why we think Vita Coco is a high-quality business, and with its shares topping the market in recent months, the stock trades at 36.8× forward P/E (or $67.01 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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