A soaring growth stock I'd buy ahead of Fevertree Drinks plc

The growth story at Fevertree Drinks(LSE: FEVR) has been impressive. The shares have quadrupled over the past four years and have soared by 1,300% over five years -- and all the company makes is drinks mixers.

But they're big business these days, with trendy drinkers wanting all sorts of variations rather than just the traditional soda water, tonic, etc.

But three things convince me the bull run is coming to an end, and I'd sell if I owned any.

You know the idea that when even the folks down the pub are talking about a stock, it's time to sell? I witnessed the equivalent on TV last week -- I wasn't paying attention, but some 'reality' person said their favourite drink would be something or other "with a nice Fevertree mixer."

Competition

Another thing is that I really don't see a defensive moat around Fevertree's business model, and nothing to prevent other makers moving into the premium mixer market (which they're already doing).

Finally, it's the share price chart itself and the shares' fundamental valuation. I've seen the same thing happening to growth darlings just too many times, and it almost always ends in a crash after the climb. Fevertree shares have already shown their first sign of weakening with a dip towards the end of 2017 -- it's come back, but that often signals the final wave of bandwagon buyers.

The initial rapid EPS growth is set to slow, with just 9% on the cards for 2018 -- yet with the shares at 2,316p, we're still looking at a forward P/E of 54. I really see that as overvalued now, and I'd walk away.

Another climber

Healthcare software specialist Craneware(LSE: CRW) has been a success for shareholders too, with its shares up fourfold in five years to 1,715p.

Its earnings growth has been at a more leisurely pace than Fevertree's, but investors have high hopes of it continuing for many years to come. And I reckon a forward P/E of 35 based on June 2019 forecasts has just become a good bit more attractive.

The company has announced two new hospital contracts with new US customers, and they look like they could have some serious potential. We don't know the names of them yet, but one is "a large blue-chip healthcare provider" which will use Craneware's products in its 20 hospitals.

Craneware says this will be as "an integral part of this provider's major system change", which sounds like it's in at the beginning and could be a long-term partner. The deal should bring in revenue of around $5m in its initial multi-year term.

The second new agreement, estimated to be worth around $3.5m in its initial term, is with "an innovative surgical hospital" and involves the supply of a number of Craneware's software packages.

Continuing trend

This comes on the back of a number of other contract wins, with the most recent announced in January expected to provide $16m in revenue over five years.

At the same time, the firm told us it expects EBITDA to come in 15%-18% ahead for the six months to December 2017. The balance sheet looks good too, with cash of more than $50m on the books.

There's clearly some momentum behind Craneware right now -- in its share price, and more importantly, in its contract developments too. I see good long-term value.

Growth excitement

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The company selected in our Top Growth Share From The Motley Fool report has already provided handsome rewards, our analysts think it has a lot more to give, and it looks a safe pick to me.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Craneware. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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