The stock of Monster Beverage (NAS:MNST, 30-year Financials) gives every indication of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $91.76 per share and the market cap of $48.5 billion, Monster Beverage stock gives every indication of being fairly valued. GF Value for Monster Beverage is shown in the chart below.
Because Monster Beverage is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 13.8% over the past three years and is estimated to grow 11.47% annually over the next three to five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company’s financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Monster Beverage has a cash-to-debt ratio of 10000.00, which which ranks better than 99% of the companies in the industry of Beverages - Non-Alcoholic. The overall financial strength of Monster Beverage is 9 out of 10, which indicates that the financial strength of Monster Beverage is strong. This is the debt and cash of Monster Beverage over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Monster Beverage has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $4.8 billion and earnings of $2.71 a share. Its operating margin is 35.19%, which ranks better than 98% of the companies in the industry of Beverages - Non-Alcoholic. Overall, the profitability of Monster Beverage is ranked 10 out of 10, which indicates strong profitability. This is the revenue and net income of Monster Beverage over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Monster Beverage’s 3-year average revenue growth rate is better than 83% of the companies in the industry of Beverages - Non-Alcoholic. Monster Beverage’s 3-year average EBITDA growth rate is 13.6%, which ranks better than 71% of the companies in the industry of Beverages - Non-Alcoholic.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Monster Beverage’s return on invested capital is 40.01, and its cost of capital is 8.24. The historical ROIC vs WACC comparison of Monster Beverage is shown below:
In conclusion, the stock of Monster Beverage (NAS:MNST, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 71% of the companies in the industry of Beverages - Non-Alcoholic. To learn more about Monster Beverage stock, you can check out its 30-year Financials here.
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