The stock market, as measured by the S&P 500, is having a fantastic year. As of Dec. 11, the broad index has climbed 28% in 2024, building off last year's 24% rise. Market sentiment is certainly strong as we set our sights on the calendar turning.

But not all companies have benefited from the bullish environment. Energy drink purveyor Celsius (CELH -4.41%) has seen its share price tank 45% this year. That might be compelling for investors looking to buy the dip.

Before you do that, though, you must know these three things about Celsius.

Focus on health and wellness

The beverage sector overall is incredibly crowded. The same is true for the smaller niche of energy drinks. While Red Bull and Monster Beverage dominate the category, they left a door open for Celsius to quickly rise up the ranks. The market was missing a leading brand focused on healthy and functional energy drinks, with natural ingredients and no sugar.

That marketing and product positioning has helped Celsius carve out a nice slice of the energy drink pie. According to Circana, the business has 11.8% market share, making it the third most popular brand in the industry.

The company's huge success in recent years, as demonstrated by revenue soaring 25-fold between 2018 and 2023, has certainly drawn the attention of competitors. Not only do Monster and Red Bull have their own sugar-free drinks, but new brands, like Zoa and Alani Nu, are finding success utilizing Celsius' health-forward playbook. Consequently, perhaps the differentiating factor that this business has had will start to diminish.

Inventory glut

I just mentioned Celsius' incredible growth trajectory. You'd struggle to find companies that have put up revenue gains like this one has. However, that slowed dramatically this year, as sales were up just 29% in the first six months of 2024 compared to the same period in 2023. Of course, no business can grow to the sky, and it's always reasonable to expect a bit of normalization.

That's not worrying. What is troubling is Celsius' Q3 financial update that revealed revenue had tanked 31% year over year.

The company's key distribution partner, PepsiCo, decided to drastically cut back on orders after it had an inventory glut. This negatively impacted sales in the quarter by $124 million, according to Jarrod Langhans, Celsius' CFO.

Management believes the issue will sort itself out. Nonetheless, this points to the challenges that the company will always face, namely around making sure it correctly balances having enough product on shelves to meet consumer demand, while at the same time not overextending.

Celsius' valuation

In the five-year period that ended in March, at the time when Celsius had achieved its all-time high, shares had surged 7,330%. That's a phenomenal return that would've turned a $1,000 investment into more than $74,000. Any investor would be incredibly pleased with that kind of result.

But the previously discussed slower growth caused market sentiment to sour. As of this writing, the stock is 69% off that peak.

Even so, I believe shares are expensive. They trade at a price-to-earnings (P/E) ratio of 41.5. While that's much lower than the 124.8 multiple the stock commanded in March, it's still a steep price to pay for prospective investors.

In my view, the current valuation reflects the belief that Celsius will get back to posting impressive revenue and earnings growth for a very long time. That might end up being true, but the industry layout gives me reason to be cautious. Competition is fierce, new brands are always being launched, and consumers have zero switching costs.

The latest price dip is still not pushing me to buy Celsius stock.