*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making investment decisions.

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making investment decisions.

At the William Blair 2020 Growth Conference, while analyzing the many stocks in tech and healthcare that are presenting, I notice a company that stood out among the other tech companies. This company happens to be a water company. I found it odd that a water company would be considered a growth stock even if the demand for water doesn't grow as fast as the demand for software or specific medical equipment. 

This company happens to be Primo Water (NYSE: PRMW). When looking at their stock, they don't look exactly like a growth stock to me. Their stock seemed to be trading sideways. But, when digging deeper, I found out that Cott acquired Primo Water and renamed themselves as Primo Water. That's when I knew that I needed to dig deeper.

Primo Water's growth thesis is supported by

• declining tap water quality
• increasing health and wellness needs at home
• higher demand for environmental sustainable solution

Looking at the chart, despite the ups and downs of the demand for dispensers, overall, the line seems to go up. Since it seems like the growth rate slightly increases every year on average, the growth of the dispenser demand will slowly start showing exponential growth. That's bullish.

Also, Primo Water has experienced same-store sales unit growth every year!

When looking at the chart, the blue bars show how much same-store sales growth was for every quarter. The blue line shows the number of units the company sold bottled water. 

According to the chart, it seems like they've been experiencing same-store sales growth every quarter but it seems like their unit sales decrease in some quarters. Most likely, those declines in unit sales came from other divisions within their water business.

One big thing to note about the company is that it has a track record of growth and massive free cash flow.

Overall, the company's net sales have been increasing and according to the adjusted EBITDA, their profitability has been increasing. Usually, businesses use the adjusted EBITDA metric to show the true profitability of a business. Uber is one example that does it. 

While I do find a water company that is perfectly capable of making profits to show their profit using adjusted EBITDA, I don't have the exact reason on why they would use it.

Also, their free cash flow seems to be increasing a lot overall with a few bumps along the way. Interestingly, their free cash flow recently has been the highest it has ever been. Let's hope that the company can continue to maintain growth in its free cash flow.

With the growth in sales for bottled water, Primo Water looks like a growth stock to me. While the growth numbers aren't as great as other companies, there is something management noted that should catch the ears of many investors. 

“5% of homes have a water dispenser”

This signals a massive opportunity. Most people get their water from the store in the form of big jugs. Other people probably use filters. If having a water dispenser in your home is going to become the new standard of living, then Primo Water provides a really enticing opportunity for investors.

Personally, as a homeowner with a water dispenser in my house, having one makes life more convenient. I originally thought that many homeowners would have a water dispenser in their homes but according to Primo Water's presentation and from my observations of going to multiple people's homes, many don't have a water dispenser. 

When analyzing Primo Water's business, they have a razor-blade business model since people need refills. Every month, people will need to get new bottles of water and in the meantime, all customers have a water dispenser that they put the bottles in. For the empty bottles, the water companies would pick up the empty bottles and refill them at their facilities. It's a unique business model.

Overall, the company is an enticing stock pick. I'll admit, this is a hidden opportunity since the water industry isn't that attractive compared to tech and doesn't have high expectations that the tech sector deals with. It will be interesting to see how the company does down the road and whether their products will be enticing to homeowners or not.