Diet soda is out. La Croix is where it's at. I'm investing in La Croix (FIZZ)

Someone needs to tell Warren Buffett that soda is bad for you.

It took me a few years, but I finally ditched my Diet Coke habit for La Croix. The maker of La Croix is a company called National Beverage (ticker symbol FIZZ) which is run by its iconoclastic founder Nick Caporolla.

I've looked at FIZZ before and it's always seemed too pricey at a 40x price-to-earnings (PE ratio) and at a market cap of $5 billion. Another company, Monster Energy, however, trades at an even higher PE ratio, and FIZZ is much smaller and growing much faster than Monster.

FIZZ will probably be at a $1 billion revenue next year assuming a 15-20% revenue increase (up from $826 million in FY4/2017). Since it's primarily a fixed-cost business, cost of goods sold goes up only 10% to maybe $550 from $500 million. Adjust the SG&A expense up a little and I get $300 million number for "income before taxes."

That's good, but still hard to justify the price.

The new tax law, however, changes everything. It drops FIZZ's tax rate from the current 34% to 21%. So all of a sudden their net income could be $240 million, up from $107 million in FY 4/2017.

At the current market cap of $5 billion, I'm paying only 21x future earnings assuming the lower corporate tax rate gets pulled forward to 2018. If we have to wait for 2019 for the new lower rate, so be it. The market will discount that in eventually.

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