Valuation is higher than its peers’
Monster Beverage (MNST) is currently trading at a higher forward valuation than its larger peers the Coca-Cola Company (KO) and PepsiCo (PEP). As of December 24, Monster’s 12-month forward PE ratio was 24.3x compared to Coca-Cola’s 20.8x and PepsiCo’s 17.8x.
Monster Beverage’s valuation multiple has fallen 15.4% since the company announced its third-quarter earnings results in November.
Does Monster’s growth rate justify a higher valuation?
Analysts expect Monster Beverage’s adjusted EPS to rise 27.3% to $1.77 in 2018. Currently, analysts expect Monster Beverage’s adjusted EPS to rise 11.9% to $1.98 in 2019.
Analysts expect Coca-Cola’s adjusted EPS to rise 8.9% to $2.08 in 2018 and to rise 6.7% in 2019. PepsiCo’s adjusted EPS are expected to rise 8.2% to $5.66 in 2018 and to rise 5.5% next year.
Monster Beverage is trying to boost its sales through continued innovation. Some of the products the company launched in the third quarter included Pacific Punch in the United States, Mango Loco in Canada, Lewis Hamilton Monster Energy drink in Mexico, Monster Pipeline Punch in Sweden, Monster Mixed Punch in Croatia, Estonia, Latvia, Lithuania, and Slovenia, and Monster Mango Loco in Germany.
In October, Monster Beverage introduced Monster Mango Loco and Monster Pipeline Punch to its New Zealand customers.
Monster Beverage’s strategic deal with Coca-Cola is helping it to leverage the soda giant’s extensive distribution network to grow further in international markets. Monster Beverage is also trying to offset the impact of higher costs by increasing the prices of its beverages. In November, the company raised the price of its Monster Energy drinks by ~4% in the United States. The company plans to increase the price of its NOS and Full Throttle drinks effective January 1, 2019. Monster is also planning to raise the price of its Monster Energy, NOS, and Full Throttle drinks in Canada starting in February next year.
However, the shift toward healthier beverages could affect the demand for Monster Beverage’s energy drinks.