Stock (Symbol) |
Monster Beverage (MNST) |
Stock Price |
$46 |
Sector |
| Food & Necessities |
Data is as of |
| April 6, 2017 |
Expected to Report |
| Apr 27 |
Company Description |
 Monster Beverage Corporation is a holding company. The Company develop, market, sell and distribute alternative beverage category beverages under the brand names of Monster Energy, Monster Rehab, Monster Energy Extra Strength Nitrous Technology, Java Monster, X-Presso Monster, Muscle Monster, Punch Monster, Hansen’s, Hansen’s Natural Cane Soda, Junior Juice, Blue Sky, Hubert’s, Worx Energy and Peace Tea. The company has two segments, Direct Store Delivery (DSD), whose principal products comprise energy drinks, and Warehouse (Warehouse), whose principal products comprise juice-based and soda beverages. The DSD segment develops, markets and sells products primarily through an exclusive distributor network, whereas the Warehouse segment develops, markets and sells products primarily direct to retailers. |
Sharek’s Take |
 Monster Beverage (MNST) has multiple areas for future growth, including rapid expansion Internationally and new drinks in different categories. MNST’s main opportunity for growth is expanding into other regions, as just 26% of sales came outside the U.S. last qtr. To “get on the shelves” Monster struck a win-win deal with Coca-Cola. In June 2015 Coke bought a 17% stake in Monster, got all Monster’s non-energy drinks, with the arrangement that Coke would handle all Monster’s International distributing. MNST also got all Coke’s energy drinks. This distribution change has meant switching to new vendors across the globe, and caused variances in sales each qtr. But the growth is enormous in some regions like the Asia Pacific region which had 53% sales growth last qtr (just expanded into China) and Latin America which had 21% growth. Although 91% of sales came from the Monster Energy segment last qtr, the company is creating new drinks to spur future growth such as Java Monster, to compete with Starbucks bottled beverages, and Mutant, an exotic Super Soda like Mountain Dew but with slightly more caffeine. Overall the company grew profits 30% last year. The stock sells for 31x earnings which is high for a beverage company but reasonable for one with good growth and a bright future. My Fair Value is 34x earnings or $50 a share this year and $58 next year. |
One Year Chart |
 Profits jumped 59% last qtr and beat the street but before you get too excited a lot of it was from the company having a lower tax rate. Sales grew 17%. The stock broke out after the company reported — and jumped 10% — but has since settled back down. I think the P/E of 31 makes it hard for investors to send this stock higher. Qtrly profit growth Estimates are 20%, 22%, 15% and 3%, with that 4thQtr needing time to adjust (higher?). MNST has a nice Est. LTG of 20%. |
Fair Value |
 My Fair Value is a P/E is coming down from 37 to 34 as it looks like profit growth will slow this year. Thus I feel the stock is worth $50 a share this year and $58 next year. Also, annual profit estimates have been ticking down so I doubt the company will underpromise and overdeliver. |
Bottom Line |
 Monster Beverage has had a solid decade, with company profits and the stock each growing around 20% on average per year. Although MNST hasn’t been hot lately, the reason for that is it ran up in anticipation when the Coke deal was put together. Even though the stock has good upside, with a 31 P/E I think it’s is rangebound until 2018. Still, International expansion and new creative drinks give Monster good growth opportunity for the future. MNST ranks 16th in the Growth Portfolio Power Rankings. I will sell the stock from the Aggressive Growth Portfolio as it’s stuck in a long-term trading range. I’d rather have cash or be holding a stock that’s trending higher. 2017 profit estimates have declined from $1.57 to $1.48 the past 4 qtrs, thus this stock isn’t that hot. |
Power Rankings |
Growth Stock Portfolio
16 of 29Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
