The Ultimate Growth Stock to Buy With $1,000 Right Now

Most growth stories in consumer goods are about a brand catching fire. The one I want to share here is about a company that spent 22 years refusing to own a factory, then wrote a $175 million check for one, and made it pretty clear how confident it is about it.

Vita Coco (NASDAQ: COCO) is a coconut water business that Michael Kirban and Ira Liran co-founded in 2004. For two decades, it operated an asset-light model, meaning it designed and marketed the product but paid outside processors to actually make it. That model produces great margins and one glaring weakness: You don't control your own supply.

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Now, I think the company is trying to become a growth stock and a vertically integrated company with control of its own supply chain.

Why a new deal changes what Vita Coco is

On July 22, Vita Coco acquired Copra, a producer of super-premium Thai Nam Hom coconut water, a chilled, faintly pink, sweeter variety sold in the refrigerated case rather than on the dry shelf. The purchase came with a factory in Thailand and what the company calls an extract-and-fill-on-site model, meaning the water goes from the coconut to a sealed package at one location instead of being shipped as concentrate.

Copra grew net sales at a 48% compound annual rate over three years and should clear $100 million this year, according to Food Dive and company disclosures. Here's the interesting part to me: The deal's earnout, which is the extra money a buyer pays later if the acquired business hits targets, has a floor of $45 million and a cap of $100 million, based on 2028 results. Earnouts normally start at zero.

Putting a floor under the deal means Vita Coco agreed to pay tens of millions more even if Copra's business completely stalls. Buyers don't usually make that kind of commitment unless they've gotten a close look at the pipeline and believe the opportunity is worth locking up before someone else does. To me, that floor says more about the company's leaders having conviction than anything they could have said on an earnings call.

The bearish argument here might be that Vita Coco paid too much for the deal but they really only paid roughly 1.75 times what Copra expects to bring in this year, and trade publication The Deal reported the business generates about $25 million in earnings before interest, taxes, depreciation and amortization, which puts the upfront price near seven times profits. That is a reasonable price for a business growing at a 48% annual clip, according to Food Dive , and management expects the deal to improve its own profit margins once the two companies are fully combined.