Monster Beverage Corp (MNST): What Can You Expect?

These 12 Stocks Could be Top Gainers in 2013Energy drink maker Monster Beverage Corp (NASDAQ:MNST) has successfully transitioned from market champagne to radioactive cocktail. As the 26th most-shorted stock on the public markets and with an earnings report only a mother could love, the company is getting pummeled on all fronts. Are the complaints overblown, or is the energy drink gold rush coming to an end for this former favorite? Let’s take a look at Monster’s recent earnings to see if you should buy the dip or jump on the short train.

Scary!
Monster Beverage Corp (NASDAQ:MNST) fell more than 10% upon release of its latest earnings report. Yet people didn’t exactly flee from the drinks in the quarter: Sales were up 7% to $484 million. Energy-addicted analysts wanted to see $501.7 million. Just a couple of years ago, Monster Beverage Corp (NASDAQ:MNST) was a double-digit growth machine — posting 20% growth quarter after quarter, year after year. Parents around the world cringed as nearly every person under the age of 18 seemed to stockpile the beverages in a hidden box under the bed.

The bottom line did suffer a retraction — from last year’s $0.41 to $0.37 in the recently ended quarter. But again, it wasn’t so much a drop in volume as it was a foreign currency issue. One-timers excluded, EPS growth was flat with the prior year’s.

As so often happens in the market, impossible expectations and valuations caught up to an otherwise fine company. When investors buy into beverage makers at metrics as high as 40 times earnings, it just isn’t that surprising when stock performance suffers in subsequent years.

So Monster Beverage Corp (NASDAQ:MNST) is riding a triple-header of overpricing, softened demand, and continued legal battles. Does this create an unloved buy opportunity, or is it catching a falling knife?

Land ho!
Unfortunately for Monster Beverage Corp (NASDAQ:MNST) investors, the stock is still expensive and has room to fall. At more than 20 times forward earnings, the market has priced Monster as a company that still grows in the double digits quarter after quarter, and is poised to do so for some time. But with 7% sales growth and flat earnings growth, it’s hard to justify the price.

For comparison, soda maker of the universe The Coca-Cola Company (NYSE:KO) trades at 18 times forward earnings. Now, The Coca-Cola Company (NYSE:KO) is a much, much bigger company with a more limited growth runway, but it’s also one of the greatest companies on the planet with demand that will seemingly last as long as the human race.

Monster Beverage Corp (NASDAQ:MNST) is not a bad company. It has zero debt on the books and a $222 million cash pile. If the stock keeps heading south, showing a P/E in the low teens, there may be a buy opportunity. For now, though, steer clear of the glowing green drink maker.

The article A Monster Turnaround on the Horizon? originally appeared on Fool.com and is written by Michael Lewis.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Monster Beverage. The Motley Fool owns shares of Monster Beverage.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!