Quick Report on Monster Beverage (MNST)

We've been asking ourselves recently if the market has placed a fair valuation on Monster Beverage. Let's dive into some of the fundamental values of this large-cap Consumer Staples company to determine if there might be an opportunity here for value-minded investors.

Monster Beverage Has Elevated P/B and P/E Ratios:

Monster Beverage Corporation, through its subsidiaries, engages in development, marketing, sale, and distribution of energy drink beverages and concentrates in the United States and internationally. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, Monster Beverage has a trailing 12 month P/E ratio of 37.0 and a P/B ratio of 7.23.

Monster Beverage's PEG ratio is 1.57, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Exceptional EPS Growth Obtained Primarily Through Share Buybacks:

2018 2019 2020 2021 2022 2023
Revenue (MM) $3,807 $4,201 $4,599 $5,541 $6,311 $6,923
Gross Margins 60% 60% 59% 56% 50% 53%
Operating Margins 34% 34% 36% 33% 25% 28%
Net Margins 26% 26% 31% 25% 19% 23%
Net Income (MM) $993 $1,108 $1,410 $1,377 $1,192 $1,566
Net Interest Expense (MM) $10 $13 -$7 n/a -$13 $98
Depreciation & Amort. (MM) $57 $61 n/a $50 $61 $66
Earnings Per Share $0.88 $1.01 $1.32 $1.29 $2.23 $3.1
Diluted Shares (MM) 1,129 1,093 1,070 1,071 533 505
Free Cash Flow (MM) $1,100 $1,012 $1,315 $1,112 $699 $1,419
Capital Expenditures (MM) $62 $102 $49 $44 $189 $163
Net Current Assets (MM) n/a n/a n/a n/a n/a n/a
Net Debt / EBITDA -0.36 -0.46 nan -0.63 -0.67 -0.73

Monster Beverage has growing revenues and increasing reinvestment in the business, low leverage, and decent operating margins with a stable trend. However, the firm suffers from slimmer gross margins than its peers and exceptional EPS growth obtained primarily through share buybacks. Finally, we note that Monster Beverage has irregular cash flows.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.