SharkNinja (NYSE:SN) currently looks intriguing as a potential investment. The stock recently pulled back to the low $70s from its 52-week high of $80. I see this as a buy-the-dip opportunity. The reason for that is because SharkNinja is growing revenue and earnings at a strong above-average pace. Plus, the stock has a low valuation, leaving additional room to the upside. SharkNinja's growth is being driven by useful products that resonate with consumers. SharkNinja is capitalizing on this with sound strategies.

SharkNinja's Business Background

SharkNinja designs various consumer products under the brand names 'Shark' and 'Ninja'. SharkNinja focuses on designing innovative products that enhance the lives of consumers. The Shark brand offers cleaning products such as corded and cordless vacuums, handheld vacuums, robotic vacuums, and other floor cleaning products. The Ninja brand focuses on various cooking and beverage appliances such as grills/ovens, air fryers, multi-cookers, coffee makers, cookware, food preparation appliances, blenders, juicers, ice cream makers, food storage coolers, air purifiers, humidifiers, and hair dryers/stylers. SharkNinja sells its products through brick-and-mortar stores, e-commerce websites, and distributors.

The company reports under one operating segment. However, SharkNinja does breakout its revenue geographically for the United States, China, and the rest of the world. Sales from China comprised 56% of total 2023 revenue. The United States comprised 37%, while the rest of the world comprised the remaining 7% of total revenue. SN also divided net sales up between each major brand in its Q1 2024 earnings report. The Shark and Ninja brands are now even with each comprising about 50% of net sales. This is a change from Q1 2023 where the Shark brand comprised 56% of net sales, while Ninja comprised 44%.

SN also breaks down net sales by major product category. The Q1 2024 report shows that cleaning appliances comprised about 40% of total net sales, cooking and beverage appliances comprised 31%, Food Prep appliances comprised 19%, and the 'Other' category comprised the remaining 10%

SharkNinja was incorporated in the Cayman Islands, but has its physical headquarters in Needham, MA. As a result, SN files reports as a foreign issuer (20-F, 6K) instead of 10-Ks and 10-Qs.

SharkNinja's Growth Catalysts

SharkNinja has what they refer to as a '3 pillar growth strategy'. The first pillar is to enter new product categories and related categories. SN added 18 new subcategories since 2021. The company's recent new categories include the Ninja FrostVault coolers and the Shark FlexBreeze indoor/outdoor fans. SharkNinja innovated the coolers with good ice retention and special drawers for sandwiches to prevent them from getting soggy. The FrostVault coolers are also priced below other premium coolers such as the YETI brand. The FlexBreeze fans have an advantage with misting attachments. SN now has a total of 33 subcategories, which is more than most of the company's competitors.

SN's 2nd growth pillar is increasing share in existing categories. The company launches 25 new products each year with 20 of those in existing categories. The strategy of expanding within existing categories accelerates the customer upgrade cycle. SN tends to add additional functionality and features for improved efficiency and convenience for end users. An example of this is SN's air fryer, the Double Stack XL. The Double Stack XL has been upgraded to be the industry's first vertical 2-basket air fryer that gives double the performance and uses 40% less counter space. SharkNinja has the leading spot in the air fryer market. The continuous innovation strategy helps the company grow and maintain its strong market share and helps to maintain margins.

The 3rd growth pillar involves SN's expansion in international markets. SharkNinja expects its international growth to outpace its domestic growth over multiple years. The company expects the international growth to come from geographic expansion, category expansion, and by strengthening relationships with retailers and distributors. SN's expansion outside of the U.S. in 2023 involved entering six new countries and launching new subcategories of products. This sets the company up well for future growth. SN is forecasting to grow significantly in Latin America, France, and Germany in 2024.

SN also expects to grow significantly in the Middle East, Poland, Spain, Italy, the Nordics, and Benelux over the next few years. The company mentioned that the United Kingdom business is growing well with a 15% sales increase in Q1 2024 over Q1 2023. SharkNinja expects its international business to possibly surpass its U.S. business. I think this is a reasonable expectation since the company's products have been successful globally and due to the higher total population of potential customers outside of the United States. SN's 3 pillar strategy looks sound for ongoing long-term growth.

SharkNinja has plenty of growth runway over multiple years into the future. The company's total addressable market is estimated to be $120 billion. The addressable market is continuing to grow. SN's sales of $4.5 billion gives the company less than 4% market share. Therefore, there is plenty of opportunity for SN to effectively implement its 3-pillar growth strategy to increase its market share over time.

Margin Improvements

SharkNinja has been achieving margin improvements over the past several years. Here is a glance at the figures:

Margin Type	2022	2023	TTM
Gross Margin	38%	45%	45.6%
Operating Margin	8.7%	8.8%	9.09%
Net Income Margin	6.3%	3.9%	4.3%

source: SeekingAlpha

Recently, SN's achievement of a 49.4% gross margin in Q1 2024 over the 46.8% GM from Q1 2023 was attributed to supply chain tailwinds and cost optimization efforts.

Improvements in margins can also be driven by SharkNinja's strategies. Increasing sales of high-margin products contributes to this. An example of this is SN's high-margin recurring revenue stream for flavored pods for the Ninja Thirsty carbonation system. Increasing the sales of flavored pods can help drive margins higher since they are a repeated purchase for Ninja Thirsty owners.

The other key factor for growing margins is SN's continuous improvement strategy. By updating products on a regular basis, SharkNinja can stay a step ahead of the competition to grow market share, which can contribute to higher sales and wider margins.

SharkNinja's Attractive Valuation

I like using the PEG ratio for SharkNinja. The reason for this is because SN is a high-growth company and the PEG ratio factors in multiple years of future growth. The growth stocks that I cover tend to perform well when the PEG ratio is below two. With that said SN is trading with a low PEG ratio of 1.1. This is much lower than the Furnishings, Fixtures, & Appliances industry's PEG of 3.1. As a result, the stock has more room to the upside as SharkNinja continues to grow.

SN's PEG ratio is based on expectations of about 17% average annual earnings growth over the next 3 to 5 years. The Furnishings, Fixtures, & Appliances industry is expecting lower EPS growth of about 9% annually over the next 5 years. The S&P 500 (SPY) is expected to grow EPS at about 14% annually over the next 3 to 5 years. Therefore, SharkNinja's higher expected growth has a good chance to drive the stock to outperform its industry and the broader market over the next several years.

Consensus estimates among SharkNinja's 11 covering analysts are calling for EPS to be $3.86 for 2024 or about 20% higher than 2023. SharkNinja was expecting EPS for 2024 to be in the range of $3.66 to $3.82 at the time of the Q1 2024 earnings report. SharkNinja appears to have the right strategies in place and the market share growth momentum to achieve this growth. The company is growing at a strong pace on a global basis through its 3-pillar strategy.

The 20% expected EPS growth for 2024 from SN's covering analysts can be driven by the company's strong revenue growth which has been 39% for the trailing 12 months and 25% for Q1 2024. Increases to margins as I mentioned earlier will also drive the strong expected EPS growth.

Shark Ninja's Technical Perspective

SN's daily stock chart above shows a hidden bullish divergence. This occurs when the stock (top section of the chart) makes a higher low while the RSI (bottom section of the chart) makes a lower low. This divergence typically results in the stock moving higher. The RSI formed a V shape, indicating that the downward momentum may have bottomed out after the recent pullback in the stock. This would be confirmed when the RSI rises and maintains the 50 level. The RSI is current at about 47.

The Risks for the Stock

Increased competition from other companies could take market share away from SharkNinja. Consumers could find similar appliances, cleaning, and other products to be more attractive from competing companies. Other companies could make new innovative products that resonate more with consumers over SN's products.

SharkNinja's rate of growth could be significantly less than expected. The company is expected to achieve strong double-digit earnings growth. If the actual growth disappoints investors, it could lead to a sharp sell-off for the stock.

SharkNinja's Long-Term Investment Outlook

SharkNinja appears to have the right strategies in place to drive long-term growth. The company's efforts to grow existing product categories, enter new product categories, and to grow internationally can drive strong growth over multiple years. The company's commitment towards continuous product improvement can help maintain excitement among consumers to drive sales.

The attractive valuation leaves plenty of room to the upside for stock. If SharkNinja meets/exceeds its earnings expectations for most quarters, the stock should grow at a strong above-average pace.