If you know popular consumer appliance brands Shark and Ninja, they’re both owned by SharkNinja (NYSE:SN) .
With trailing 12-month returns in excess of 50%, SN has been on a tear recently and looks as though it could still be set to rise further.
How high can SharkNinja go, and could this consumer appliance business be a solid investment to make in today’s market?
SharkNinja Price Has Been On a Tear
Q1 was the latest in a series of generally positive quarters for SharkNinja. During the quarter, net sales rose 14.7 percent to $1.2 billion.
Net income, meanwhile, increased 7.5% to $117.8 million. Adjusted net income, however, did fall 16.7%.
The business’s cash reserve also shrank a good bit over the past year, declining from $363.7 million in the year-ago quarter to $224.7 million in Q1.
Q1 also showed SharkNinja’s success in branching out into new product categories. The quarter’s high rate of revenue growth was driven to a large extent by a 45.0% increase in net food preparation appliance sales, which rose to $92.4 million.
Appliances for making frozen drinks and ice cream proved to be the major growth drivers within this category. SharkNinja’s beauty and home environment appliances business line also outperformed overall sales growth with a 25.8 percent increase in net sales.
In addition to its financial performance, SharkNinja has a strong brand presence that gives it a fairly decent moat within its market. Ninja products, in particular, enjoy high levels of consumer trust. This not only helps SharkNinja in marketing its existing products but also gives it a highly engaged customer base for new releases.
How Much More Growth Could SharkNinja Have in It?
What SharkNinja does possess is great brand recognition, ongoing innovation and successful marketing, so there is probably still a decent amount of room for SharkNinja to run from here.
For FY2025, management has raised its revenue growth guidance to the range of 11 to 13 percent, up from the previous expectation of 10 to 12 percent. Adjusted EPS growth is now expected to come in at 12 to 14 percent, another upward revision from the previous range of 10 to 12 percent.
On a longer-term basis, analysts expect that SharkNinja’s EPS will rise at a compounded annual rate of 11.2 percent over the next 3-5 years. While this may not be a massive rate of earnings growth, it appears to be a sustainable growth rate that the business may be able to maintain over a number of years.
Are SN Shares Fairly Valued?
After their 50% gains in the last year, SharkNinja shares trade at something of a premium valuation. The stock is currently priced at 35.1 times earnings, 2.8x sales, 7.7x book value and 84.1x operating cash flow.
With the exception of the high price-to-cash-flow ratio, however, these numbers may not be completely out of line for a business that’s performing well and appears likely to keep compounding at a steady rate.
To begin with, let’s consider the fact that SharkNinja is producing very respectable returns on both equity and invested capital. The business has posted a trailing 12-month ROE of 24.9 percent and an ROIC of 16.9 percent. Over long periods of time, these two metrics, particularly ROIC, tend to be indicative of overall stock returns.
Both analysts and institutional investors also seem to see promise in SN shares. The average price target for the stock is $121.27, about 9.3 percent above the last price of $110.99.
Since November of 2024, the number of shares being bought by institutional investors has handily outweighed the number of shares being sold. Institutional ownership of SN stands at over 80 percent at the time of this writing, showing strong interest on Wall Street in spite of a somewhat high P/E ratio.
Tariffs Are Real Threat
One of the possible issues investors may find with SN shares at the moment is the business’s exposure to higher tariff costs.
SharkNinja is in the process of shifting manufacturing out of China, a process it expects to complete by the end of the year.
By moving production to other Southeast Asian nations, management hopes to avoid the worst of steeper tariffs. This process, however, will very likely involve some additional supply chain costs in the short term.
As a maker of consumer appliances, SharkNinja could also see some modest headwinds if American consumers pull back on spending. Although the drop was an extremely modest 0.1 percent, consumer spending fell for the second time this year in May.
With household budgets being strained by rising prices and consumer confidence falling off, the near future could be a somewhat difficult time for consumer discretionary businesses like SharkNinja.
So, How High Can SharkNinja Stock Go?
With economic conditions weakening somewhat and the stock already trading at a bit of a premium, SharkNinja may only hit the $120-$130 range in the coming 12 months.
Even with a couple of near-term risks, SharkNinja looks as though it could be a compelling investment. SharkNinja enjoys a strong brand moat, a history of solid management execution and a respectable level of earnings growth that looks as though it could be sustainable over the long run. Adding in strong returns on both equity and invested capital, there’s a great deal to like about SharkNinja as a business.
With that said, it seems quite unlikely that SN shares will produce the kind of returns in the near future that they have over the last several months. This would see returns roughly track the expected rate of forward earnings growth, though earnings surprises could obviously cause the stock to move above this range.
Looking further down the line, SN could be a good long-term compounding investment for investors looking for growth in a strong consumer brand. Though SharkNinja may not deliver the extremely high rate of return it has over the last 12 months or match the kind of returns currently being seen among high-growth tech stocks, the business does appear to have long-term potential that could cause its shares to move progressively higher over multiple years.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.