Dear Mr. Berko:

What is your opinion of Hansen Natural? I’ve tasted nine of their all-organic and natural beverages, and each is delicious. I tried two of their energy drinks, and they saved my day at the office after a long evening before. Their sodas are a little pricey, but they’re worth it, and I don’t have to worry about all those unhealthy chemical compounds that are in Coke and Pepsi. My husband and I have been drinking several of the fruit-flavored sodas, and the Hansen drinks have helped us lose nine and 14 pounds, respectively, in the past five months. Please tell me if you think this stock is a good investment for the next two to three years.

G.A., Santa Monica, Calif.

Dear G.A.:

Hansen Natural Corp. (HANS-$33.20) looks like a natural. This unique beverage company, founded in Los Angeles in 1930 by Hubert Hansen and his three boys, went public in late 2004 at $25 a share. The shares split 2-for-1 late last year, and split 4-for-1 in July of this year. So a 100-share purchase at $25 would now be 800 shares worth more than $26,000.

This 75-year-old company that sells a surprisingly popular line of all-natural organic beverages might be on to something big. Revenue and earnings growth have been phenomenal, and demand for HANS products continues to zoom.

Hansen makes and markets alternative natural beverages, and “natural” is the operative word here. The company markets fruit drinks, energy sports drinks, fruit juice smoothies, sparkling lemonades and orangeades, and other fruitades are to be announced. HANS also markets non-carbonated, ready-to-drink teas, juice cocktails, multivitamin juices, non-carbonated flavored waters plus the immensely popular Monster Energy, Lost Energy, Rumba and Joker Mad Energy brand names.

The company also markets natural sodas, sodas with supplements, organic natural sodas, seltzer waters and energy drinks under the Blue Sky name. HANS also markets popular vitamin and mineral drink mixes in powder form, and they’re good.

The boys at Anheuser-Busch Cos. Inc., mindful of the boom toward natural products, recently signed a distribution agreement with HANS that could nicely boost Hansen’s revenues. Market share also might zoom even more because Vons, Costco, Wal-Mart, Ralphs, Sam’s Club and Trader Joe’s are going organic with Hansen’s natural products.

These products cost more than beverages containing toxins, contaminants, metals, flavor enhancers, colorings, preservatives, compounds and benzoates, but they won’t stain your kidneys, fulminate in your bladder or burn holes in your intestinal tract. The California Division of Health Services recently awarded HANS a three-year contract for shelf-stable, ready-to-drink 100 percent apple and 100 percent grape juices. It’s reasonable to expect more to come.

The company’s revenues were $110 million in 2003. In 2004, when HANS went public, revenues inched up to $349 million, and this year that number is expected to creep a bit higher to $525 million. So considering the public’s heightened health awareness and growing taste for natural and organic products, the Street believes HANS’s revenues could top $1 billion by 2010 with net profit margins of 18 percent.

HANS has no debt, 91 million shares outstanding and should earn $1.11 per share this year and $1.60 per share in 2007 with cash flow per share just about equal to earnings. Observers are certain that the next few years will easily exceed Wall Street expectations. Whole Foods, Kroger, Safeway, A&P and other large supermarkets may soon carry HANS products, as will many vending machines and convenience stores. Now that the California Department of Health Services has contracted with the company, it’s reasonable to assume that other states as well as public school systems might follow suit. HANS’s products (especially its all-natural and nutritious energy drinks) will certainly be sold in Europe, Asia and the lower Americas. Cadbury Schweppes recently announced a distribution agreement to market HANS products in Mexico, so Europe and Asia might not be far behind.

HANS trades at 21 times next year’s earnings, and the excitement of its beverages, its amazing acceptance, its superb tastes and the obvious health benefits seem to justify that price-earnings ratio.

I believe HANS, like Celestial Seasonings, Snapple, Gatorade and Arizona Tea, will be an uncommon success. These are companies that at the pinnacle of their revenue cycle were purchased by much larger companies. So I wouldn’t be astonished if a big food concern decided to take HANS to the altar.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

© Copley News Service