1 Growth Stock Down 64% to Buy Right Now

There's never a bad time to buy a good stock. But there are certainly better times than others. Stepping into a new name after a pullback ultimately raises your potential gain.

With that as the backdrop, risk-tolerant investors might want to wade into a new position in Celsius Holdings (NASDAQ: CELH) while shares are still down 64% from last March's peak. Their recent rally from February's multiyear low may be a hint of what's to come sooner than later.

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What's Celsius?

Never heard of Celsius? Don't sweat it. Plenty of people haven't. The company's $8 billion market cap just doesn't turn many heads.

On the other hand, you've certainly heard the adage "good things come in small packages." So...

Celsius Holdings is categorized as an energy drink company, although the classification doesn't quite do it justice. While there's certainly some market overlap with products from energy drink giants Monster Beverage (NASDAQ: MNST) and Red Bull, Celsius is specifically taking aim at the health and fitness-minded crowd that wants to burn calories while exercising. Its drinks consist of the guarana seed, ginger root, green tea, and other all-natural ingredients you'd expect to find in such a product, but they don't have the sugar, high fructose corn syrup, or aspartame you might also expect. There are no artificial colors or flavors in Celsius' drinks either.

And it's a proven product. While far from being the clinical trials that new prescription pharmaceuticals must go through, the metabolism-burning boost that Celsius claims its drinks can drive has been verified by a handful of different university-level studies. It's a small detail, but an increasingly important one to consumers who are growing savvier by the day about the impact of what they're putting into their bodies.

The kicker: The company's doing particularly well with women, who have remained mostly under-addressed by the aforementioned Red Bull and Monster. Both have tended to focus on male consumers interested in extreme sports -- or at least an extreme interest in remaining awake for prolonged stretches of time. Its recent acquisition of the Alani Nutrition (or Alani Nu) brand bolsters Celsius' capacity to market its products to women.

Don't jump to conclusions based on the pullback

So why's the stock down so much for the past year?

It's not an indictment of the company's performance, to be clear. Although Celsius Holdings only accounts for about 12% of U.S. grocery stores' sales of energy drinks, this company contributed 30% of the category's total 2024 net growth with its own top-line growth of 22%. It is catching up with Red Bull and Monster.

And that's just within the United States. Last year it entered six new overseas markets, including the United Kingdom, France, and Australia. Although its international reach is still relatively small, both arms enjoy healthy growth potential. Straits Research believes the global energy drink market is set to grow at an average annual pace of 8.5% though 2032, with the same better-for-you preference that's evident here soon to firm up overseas as well.

Rather, shares of this small company are down as much as they are since last February mostly because they rallied so much -- too much -- the year before. The bullish Celsius story first picked up steam in the early days of the COVID-19 pandemic when the world was largely stuck at home and used the free time to get in shape. It didn't take long for the rally to become self-sustaining. Once leveler heads finally prevailed early last year, the market recognized it needed to right-price this red-hot ticker.

In the same way the buyers overshot their target, though, the sellers have arguably done the same. Shares of this profitable company are priced at just under 40 times this year's projected earnings of $0.91 apiece, and just a little over 30 times next year's expected per-share bottom line. That's not exactly cheap.

For a company regularly producing revenue growth at a rate in the mid-teens, however, it's not exactly wildly expensive either. That's what the stock's recent recovery effort suggests anyway.

Data source: StockAnalysis.com. Chart by author. Figures do not yet reflect the impact of the acquisition of Alani Nu.

And for what it's worth, the vast majority of the analyst community considers this stock a strong buy. Their consensus price target of $40 is also 12% above the stock's present price, which isn't a bad way to start out a new trade.

A risk worth taking -- for some

Like Celsius' energy drinks, an investment in Celsius Holdings stock isn't for everyone. At the very least this ticker's proven it can be uncomfortably volatile, and at worst, the company's trying create a new sliver of the energy drink business by targeting a crowd that's far less proven than Monster's and Red Bull's typical core audience. There's ample evidence that it's getting traction with the fitness-oriented crowd in general and women in particular. But these aren't quite ironclad markets.

Red Bull and Monster aren't simply going to sit back and let this up-and-comer continue to poach potential customers in the meantime. If not now, both will counter sooner than later.

There is room and opportunity for a clever newcomer, though. In the same sense that companies like Starbucks and Tesla made relatively small tweaks to simple products to make them considerably more marketable, Celsius Holdings may well be right where the energy drink business is going.

You could certainly own higher-risk, lower-payoff prospects anyway.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius, Monster Beverage, Starbucks, and Tesla. The Motley Fool has a disclosure policy.