uploads///MNST Valuation

How Monster Beverage’s 3Q17 Results Affected Its Valuation


Nov. 13 2017, Updated 9:02 a.m. ET

Impact of 3Q results

Monster Beverage’s (MNST) 12-month forward PE (price-to-earnings) ratio rose 1.3% to 36.2x on November 9 in reaction to the company’s 3Q17 results. The company announced its 3Q17 results after the markets closed on November 8.

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Premium valuation

Monster Beverage is trading at a higher valuation multiple compared its nonalcoholic beverage peers. As of November 9, Coca-Cola (KO), PepsiCo (PEP), and Dr Pepper Snapple (DPS), Monster Beverage’s peers in the nonalcoholic beverage space, were trading at 12-month forward PEs of 23.9x, 20.5x, and 18.2x, respectively. Monster Beverage is also trading at a premium valuation compared to the S&P 500 Index (forward PE of 18.5x).

Growth expectations

The forward PE multiple is impacted by many factors including growth expectations. Analysts expect Monster Beverage’s sales to rise 11.6% to $3.4 billion in the full-year 2017. The company’s diluted EPS (earnings per share) is expected to rise 13.9% to $1.48 in 2017. Currently, analysts expect Monster Beverage’s sales and EPS to rise 11.1% and 14.9%, respectively, in 2018.

Monster Beverage’s strong portfolio of energy drink brands is expected to drive its growth in the domestic and international markets. The company is further enhancing its product offerings through innovation. The company introduced White Lightning, a zero-sugar beverage, in July 2017. White Lightning is a line extension of the company’s Mutant brand family. The company introduced Mango Loco, a new flavor of its Monster Energy juice product line, nationally in September. The company also launched Monster Energy Fury in September in Nigeria. The company plans to introduce The Lewis Hamilton signature Monster Energy drink to the Australian market in early 2018. This product, which was initially launched in 2Q17, is now available in 22 EMEA (Europe, the Middle East, and Africa) markets.

Let’s look at analysts’ ratings for Monster Beverage stock in the next part of this series.


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