Moreover, Monster Beverage Corp (NASDAQ:MNST) is a growing underdog with solid fundamentals that back up its feverish top and bottom line growth.
Forward P/E | Price to Sales (ttm) | 5-year PEG | Return on Equity (ttm) | Debt to Equity | Operating Margin | Profit Margin | |
Monster Beverage | 23.75 | 4.28 | 1.68 | 37.02% | No debt | 25.24% | 15.66% |
Coca-Cola | 17.70 | 3.79 | 2.12 | 26.59% | 106.78 | 23.25% | 18.19% |
PepsiCo | 17.08 | 1.92 | 2.06 | 27.15% | 130.88 | 14.19% | 9.33% |
Advantage | PepsiCo | PepsiCo | Monster Beverage | Monster Beverage | Monster Beverage | Monster Beverage | Coca-Cola |
Source: Yahoo Finance, 6/4/2013
While The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) are cheaper value stocks based on P/E and P/S valuations, Monster Beverage Corp (NASDAQ:MNST) excels in forward growth projections, past performance and strong margins. It also has a clean balance sheet, which means it could take on more debt to expand globally.
The Foolish bottom line
At its current price, Monster Beverage is an undervalued growth stock. If the company can weather the safety concerns regarding its energy drinks business, its stock could soar. Considering how strong the company’s May numbers are, those numbers could rise even higher once these concerns subside.
Lastly, I don’t think a takeover by The Coca-Cola Company (NYSE:KO) is out of the question yet. At some point in the future, I think Coca-Cola will realize that it might be easier to pay a steep premium for Monster Beverage, rather than to compete with its own unsuccessful energy drinks. Coca-Cola has $18.4 billion in cash, while Monster Beverage Corp (NASDAQ:MNST) currently has a market cap of $9.9 billion. Shares of Monster Beverage are still under pressure, which means that The Coca-Cola Company (NYSE:KO)’s window of opportunity of buying Monster at a discount could be numbered.
Other than the dark cloud of litigation and FDA investigations hanging over the company, there’s not much to dislike about Monster Beverage. I think it’s a solid investment at current levels and is a nice example of Buffett’s classic philosophy of buying when “others are fearful.”
Leo Sun owns shares of Coca-Cola. The Motley Fool recommends The Coca-Cola Company (NYSE:KO), Monster Beverage, and PepsiCo, Inc. (NYSE:PEP). The Motley Fool owns shares of Monster Beverage Corp (NASDAQ:MNST) and PepsiCo.
The article Will April Showers Bring May Flowers for This Beverage Maker? originally appeared on Fool.com.
Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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