Ask Matt: What do you think about SodaStream's stock?

— -- Q: What are your thoughts on SodaStream and its stock?

Rather than making machines and pods to help consumers make coffee at home, though, SodaStream makes machines and sells supplies needed to make carbonated beverages. The Israel-based company sells bottles, carbon-dioxide cylinders and other equipment used to make soft drinks at home.

If this sounds like the latest version of the Easy-Bake Oven, don't be so quick to scoff. The company's revenue jumped 39% during 2011, and the company's net income soared 119%. Given such a strong showing from the company's business, it's no mystery investors are getting bubbly over the stock. Shares of SodaStream are up 25% this year as investors expect the company to go mainstream.

But should you plug SodaStream into your portfolio? To find out, we'll put the stock through the four tests considered at Ask Matt, including:

Step 1: Risk vs. reward. When you take a risk on a stock, you want to make sure you're properly rewarded. Typically, investors might study many years of a company's trading history. However, SodaStream's trading history goes back to just 2010, which isn't enough to do any meaningful statistical analysis on the stock.

Step 2: Measure the stock's discounted cash flow. Some investors decide if a stock is pricey by comparing its current price to the present value of its expected cash flows. It's a complicated analysis made simple with a system from New Constructs.

However, due to SodaStream's limited history, there isn't a discounted cash flow analysis available on the stock. This is another key type of analysis that's just not applicable to this stock.

Step 3: Compare the stock's current valuation with its historical range. BetterInvesting's Stock Selection Guide can help. If the company can increase earnings 20% a year the next five years, that would put the stock in the "buy" range. This indicates the stock is a bargain relative to the earnings the company is expected to generate.

But, again, with such limited operating history, this is not a measure to be relied on. The verdict on the stock is based on just two years of earnings data, which aren't enough to be a valid range of the company's valuation.

Step 4: Check the company's financial health. Before investing in any company, you want to make sure it's in good financial shape. A quick way to check is to look at where it falls on the USA TODAY Stock Meter, which ranks stocks from conservative (1) to aggressive (5). SodaStream scores an average 2.8 here. You can get a Stock Meter score for almost any stock by going to money.usatoday.com and putting the stock's ticker symbol or company name into the Get a Quote box.

The bottom line: SodaStream has lots of momentum behind it. Not only is the stock powering higher, the company's sales and earnings are also on an upward trajectory. The company's products are also being sold at prominent retailers, such as Bed Bath and Beyond. But, does the company's sudden success mean you should jump in?

It's hard to make a case for this one. Given such a limited operating history, it's difficult for investors to do the kinds of research that's needed. That leaves investors with just a few quarters of good results, and a promising story.

Unless you're an experienced investor with deep knowledge of the industry, you might want to sit this one out and watch for a while. Companies like these often come and go and you don't want to be the one holding shares of the latest fad company. If the company proves it has lasting power, then you'll want to consider it more carefully.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz