IBD's beverages industry group has gotten through the stock market convulsion relatively well, and group leader Primo Brands is Tuesday's IBD Stock Of The Day as the Sparkletts parent holds an important chart level.
Although Primo Brands fell as much as 11% from its Feb. 28 closing high, the stock held above its 50-day moving average — except for one day. On Monday, shares slid below the line but closed at 32.98, near session highs and only a fraction below the 50-day average at 33.09. PRMB stock is back above the 50-day line Tuesday.
The relative strength line continues to trend higher, reflecting the stock's outperformance.
Last month, the stock climbed to the highest level since November 1993, as the company found itself part of a social media craze.
TikTok wellness influencer Ashton Hall drinks Primo's Saratoga bottled water around 4 a.m. and dunks his head into a bowl filled with it. This odd morning routine went viral on TikTok in March.
While the online craze may have something to do with the stock's March performance, Primo's emergence as an industry leader has many reasons.
Primo Brands has the highest Composite Rating of 23 stocks in the nonalcoholic beverages industry group, beating well-recognized companies such as Coca-Cola, Monster Beverage and former industry leader Celsius Holdings.
Sparkletts Water Parent Shows Solid Growth
Its three-year EPS growth rate is 29% and three-year sales growth rate is 51%, according to IBD Stock Checkup.
Furthermore, analysts don't expect Primo earnings to dry up. EPS growth is seen flowing at 52% in 2025 and 26% in 2026.
The company is the nation's largest provider of bottled water. It sells its products at stores or via delivery to 3 million homes and businesses. Using acquisitions for growth, Primo now has 13 core brands. Poland Spring and Pure Life have more than $1 billion in annual sales each.
The Saratoga brand has more than $100 million in annual sales. It's part of Primo's premium brands category, which Dean Metropoulos, nonexecutive chairman, said at the company's Investor Day is "expanding wonderfully and dramatically."
At the Feb. 27 event, Primo said consumer trends are favorable, including growing awareness of water quality and potential regulatory changes aimed at consumer wellness. The bottled water category grew at a 3.4% compound annual growth rate in 2022-24.
The company sources its water from 90 springs across the country.
Parent's Costs Not A Worry
Metropoulos also said the company will be looking for more acquisitions. While labor costs could go up, Metropoulos said Primo is not too worried about inflation.
"We've hedged our fuels, our plastic, very effectively, lower costs every year than the past three years," he said, according to a transcript of the investor day presentation. Productivity gains will absorb inflationary costs.
Although the stock market is rebounding Tuesday, market risk remains quite high. It's best to avoid buying stocks right now, but consider Primo Brands for your watchlist. It may be best to wait for the stock to form a new base, since it's already about 40% above its latest base breakout in September.
Primo stock has a 21-day average true range (ATR) of 3.73%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs. In the current, unpredictable market, IBD suggests stocks with ATRs of 3% or below.
