Weight-loss drugs are all the rage… but their manufacturers face growing competition. That puts future growth at risk.

I’ve found something far more profitable – a company that’s making money from a different side of America’s health revolution…

The muscle-building side.

This $10 billion nutrition giant is quietly dominating a market most investors don’t even know exists.

And here’s the kicker – it’s using AI to decode consumer behavior while generating cash returns that would make Goldman Sachs jealous.

It has the kind of business that prints money while everyone else burns through cash trying to develop the next miracle drug.

Your Stock of the Week combines two of my favorite things: rock-solid fundamentals and cutting-edge technology.

Click on the image below to see why this nutrition powerhouse could be your next big winner.

Transcript

Welcome to another “Stock of the Week” as part of my Dealmaker’s Diary.

We’ve got another one knocking the ball out of the park in so many ways – or ringing the bell as you might say.

It’s Bellring Brands (NYSE: BRBR).

You may or may not have heard of it, but let’s look into this billion-dollar-plus company.

We’re talking about net sales of $1.83 billion with some phenomenal numbers behind them – and that’s what I like.

Through Premier Protein they operate in the protein-based nutrition sector, a big business.

I consume a lot of those myself – not necessarily this brand, but protein-based nutrition generally.

We’ve all been getting way too little protein and have been told we’re eating too many carbs, which is why we’re all on Wegovy.

The company now has a market cap of just under $10 billion.

AI Integration Analysis

As I do each week, because we are in that age, I like to examine how companies are using AI.

Bellring is leveraging AI for consumer intelligence to decode consumer behavior and refine products and marketing strategies. It’s incredible how AI is in everything.

Obviously, on the supply chain, you’d expect it to do that for efficiency, cost savings, and procurement.

No wonder the stock market keeps going up – AI is helping boost the bottom line across industries.

Their AI implementations include:

  • Digital engagement optimization to help with digital campaigns, influencer partnerships, and e-commerce – All of those kinds of things made quicker, cheaper, and more efficient
  • Smart retail and merchandising analytics to guide retail shelf placement – AI will tell you where things should be compared to where the competitors are
  • Product personalization and innovation – This is quite a big thing actually. If you can get into making products, particularly health-related ones, where you think “these are the specific vitamins I should have based upon my results,” guess what? People are more sticky.
  • Quality assurance – Not something I thought of until I read it and thought, “That makes sense. That’s clever.”

The Numbers That Excited Me

My proprietary Value-Growth-Income rating gives Bellring a 7 out of 10.

Remember, this is my rating which weighs valuation of a company, revenue growth, earnings growth, dividend yields – all of this.

Anything with a 7 out of 10 meets my minimum criteria, so tick for that.

Now this is a bit expensive; I grant you.

The forecast price-to-earnings ratio is 28x – you’re paying $28 for every future dollar of profits, and it’s not a tech company even though, as I showed you, it’s using a lot of AI.

However, the Cash Return on Capital Invested is probably one of the highest I’ve ever seen.

This measures the amount of cash the company is generating based on the capital it has invested.

In other words, it’s not investing a significant amount of capital for the amount of cash it generates. Cash doesn’t necessarily mean profits, but without cash, there are no profits. So that is phenomenal.

It’s the Goldman Sachs measure that they use to determine companies in the top quartile, which tend to outperform those outside of the top quartile by a significant margin, and this one definitely proves the point.

The Sortino ratio is above 1 – rare for a company. What it means: lots of return, very little downside risk relative to that return.

Volatility is well below 20% – I love that. And does it generate alpha? In other words, outperformance of the markets? Oh yes, it does.

Valuation and Price Considerations

Looking at the price, is too much just priced in?

Well, you know what? Minus 18% there. So yes, you could argue it’s going to drop to a mean reversion, but those valuations are not particularly troubling.

If you look at 2022, the mean reversion looks closer to that.

Now what happens if it goes there? From $61 to $22 – is that kind of drop likely? Of course, anything’s likely. T

he question you’ve got to ask yourself is: are you in for the shorter term?

In which case, if you are, you probably want to use that as a stop loss. If you’re in for the longer term, you want to use that to buy more, buy more, buy more, buy more. Longer-term investors would keep buying on the way down.

Shorter-term people would get out sooner, and that’s the downside of being shorter-term. The upside of being shorter-term is you make more money over the short term if you’re right.

The discounted cash flow analysis shows the stock is 20% undervalued.

So, on the discounted cash flow, the numbers still look good.

Thank you very much. I hope you enjoyed that analysis and, well, you know I was going to say it – I hope it rang your bell.

— Alpesh Patel

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Source: Total Wealth Research