Wall Street is expecting double-digit growth from this beverage company over the next five years, and the shares were just initiated at Macquarie, with an ‘Outperform’ ranking.
Monster Beverage Corporation (MNST)
From Validea Hot List Newsletter
Strategy: Growth Investor
Based on: Martin Zweig
Monster Beverage Corporation (MNST) develops, markets, sells and distributes energy drink beverages, sodas and/or concentrates for energy drink beverages, primarily under various brand names. The company has three segments: Monster Energy Drinks segment, which consists of its Monster Energy drinks, as well as Mutant Super Soda drinks; Strategic Brands segment, which includes various energy drink brands owned through The Coca-Cola Company (TCCC), and Other segment (Other), which includes the American Fruits & Flavors (AFF) third-party products. The Strategic Brands segment sells concentrates and/or beverage bases to authorized bottling and canning operations.
P/E RATIO: PASS: MNST’s P/E is 42.02, based on trailing 12-month earnings, while the current market PE is 21.00.
SALES GROWTH RATE: PASS: The change from this quarter last year to the present quarter (9.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (9.1%) of the current year. Sales growth for the prior must be greater than the latter.
CURRENT QUARTER EARNINGS: PASS: Current EPS be positive. MNST’s EPS ($0.39) pass this test.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: PASS: If the growth rate of the prior three quarter’s earnings, 23.68%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 30.00%, (versus the same quarter one year ago) then the stock passes.
EARNINGS PERSISTENCE: PASS: A company’s earnings must increase each year for a five-year period. MNST, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.62, 0.65, 0.92, 0.95 and 1.19, passes this test.
LONG-TERM EPS GROWTH: PASS: One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. MNST’s long-term growth rate of 19.42%, based on the average of the 3, 4 and 5-year historical eps growth rates, passes this test.
TOTAL DEBT/EQUITY RATIO: PASS: A final criterion is that a company must not have a high level of debt. MNST’s Debt/Equity (0.00%) is not considered high relative to its industry (151.52%) and passes this test.
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, September 22, 2017