12-month forward PE
As of November 1, Monster Beverage (MNST) was trading at a 12-month forward PE of 36.5x. The company’s valuation multiple has risen about 9.7% since the announcement of its 2Q17 results in August 2017. The company is trading at a higher valuation multiple compared to the S&P 500 Index (forward PE of 18.4x).
Comparison with peers
Monster Beverage’s valuation multiple is higher than its peers’ multiples. As of November 1, Coca-Cola (KO), PepsiCo (PEP), and Dr Pepper Snapple (DPS) were trading at 12-month forward PE (price-to-earnings) ratios of 23.6x, 20.2x, and 18.2x, respectively. The S&P 500 Consumer Discretionary Index was trading at a 12-month forward PE of 20.2x.
The 12-month forward PE is computed by dividing a company’s current stock price with its estimated EPS (earnings per share) over the next four quarters. It varies among peers based on several factors like growth expectations and risk-return profile.
Monster Beverage has been delivering higher growth in its sales and adjusted EPS in the recent quarters compared to major nonalcoholic beverage peers.
What analysts expect
For the full-year 2017, analysts expect Monster Beverage’s sales to rise 4.2% to $6.7 billion. The company’s adjusted EPS is expected to grow 13.9% to $1.48 in 2017. Currently, analysts expect Monster Beverage’s sales and adjusted EPS to rise 3.5% and 15.6%, respectively, in 2018.
Continued demand for the company’s energy drink brands and improved margins are expected to drive the company’s results.
As of November 1, Monster Beverage stock was rated a “buy” by 78%, or 14 out of 18 analysts. Four analysts rated the stock a “hold”. None of the analysts currently has a “sell” rating for Monster Beverage stock. As of November 1, the 12-month average price target for Monster Beverage stock was $58.41. This price target indicates an upside potential of 1.1%. As mentioned in part one of this series, Monster Beverage stock has risen 30.4% since the beginning of 2017.
Analysts’ price target for Monster Beverage stock and its forward valuation multiple are likely to change with the company’s upcoming 3Q17 results on November 8.
For more updates and earnings analysis, visit Market Realist’s Nonalcoholic Beverages page.