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Monster Beverage’s Valuation Compared to Its Peers

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Current valuation

As of January 23, 2017, Monster Beverage (MNST) was trading at a 12-month forward PE (price-to-earnings) ratio of 29.4x. The company’s valuation multiple has fallen 4.1% since the announcement of its 3Q16 results in November 2016.

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Comparison with peers

Monster Beverage’s valuation is currently higher than major nonalcoholic beverage companies such as Coca-Cola (KO), PepsiCo (PEP), and Dr Pepper Snapple Group (DPS). As of January 23, 2017, Coca-Cola, PepsiCo, and Dr Pepper Snapple Group were trading at 12-month forward PE multiples of 21.0x, 20.2x, and 19.2x, respectively. Coca-Cola has a 16.7% stake in Monster Beverage that it purchased as part of a strategic deal between the two companies.

Monster Beverage is currently trading at a higher valuation multiple than the S&P 500 Index, which was trading at a 12-month forward PE of 17.6x as of January 23, 2017.

Growth expectations

The 12-month forward PE multiple differs among companies based on several factors such as growth expectations and risk-return profile. Analysts currently anticipate higher revenue and earnings growth rates for Monster Beverage compared to other major nonalcoholic beverage companies.

For 2016, Monster Beverage’s sales are expected to rise 12.4% to $3.0 billion. Its 2016 adjusted EPS (earnings per share) is anticipated to rise 24.1% to $1.24. Currently, analysts expect MNST’s sales and adjusted EPS to rise 11.1% and 19.8%, respectively, in 2017.

Analysts are expecting sales for Coca-Cola and PepsiCo to fall 4.8% and 0.50%, respectively. They expect sales for Dr Pepper Snapple Group to rise 2.4%. Adjusted EPS in 2016 for Coca-Cola is expected to fall 4.5%. For PepsiCo and Dr Pepper Snapple, adjusted EPS is expected to rise 5.0% and 9.8%, respectively.

In the next and final part of our series, we’ll look at analyst recommendations for Monster Beverage stock.

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