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Food Processing Stocks

Monster Beverage Corp Valuation – January 2016 Update $MNST

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Monster Beverage Corp (MNST) fares in the ModernGraham valuation model.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of MNST

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $29,224,403,500 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 7.43 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 323.27% Pass
6. Moderate PEmg Ratio PEmg < 20 57.13 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.26 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 7.43 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

MNST value chart January 2016

EPSmg $2.45
MG Growth Estimate 15.00%
MG Value $94.40
Opinion Overvalued
MG Value based on 3% Growth $35.55
MG Value based on 0% Growth $20.84
Market Implied Growth Rate 24.32%
Current Price $140.09
% of Intrinsic Value 148.40%

Monster Beverage Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends along with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.16 in 2011 to an estimated $2.45 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 24.32% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Monster Beverage Corp (MNST)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

MNST charts January 2016

Net Current Asset Value (NCAV) $13.46
Graham Number $38.84
PEmg 57.13
Current Ratio 7.43
PB Ratio 6.26
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0



Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $3,750,647,000
Total Current Liabilities $504,606,000
Long-Term Debt $0
Total Assets $5,603,738,000
Intangible Assets $1,715,978,000
Total Liabilities $949,181,000
Shares Outstanding (Diluted Average) 208,094,000

Earnings Per Share History

Next Fiscal Year Estimate $2.92
Dec14 $2.77
Dec13 $1.95
Dec12 $1.86
Dec11 $1.53
Dec10 $1.14
Dec09 $1.11
Dec08 $0.56
Dec07 $0.76
Dec06 $0.50
Dec05 $0.33
Dec04 $0.11
Dec03 $0.03
Dec02 $0.02
Dec01 $0.02
Dec00 $0.02
Dec99 $0.03
Dec98 $0.02
Dec97 $0.01

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.45
Dec14 $2.10
Dec13 $1.68
Dec12 $1.44
Dec11 $1.16
Dec10 $0.92
Dec09 $0.76
Dec08 $0.54
Dec07 $0.47
Dec06 $0.28
Dec05 $0.15
Dec04 $0.05
Dec03 $0.02
Dec02 $0.02
Dec01 $0.02
Dec00 $0.02
Dec99 $0.02

Recommended Reading:

Other ModernGraham posts about the company

Monster Beverage Corporation Analysis – October 2015 Update $MNST
Monster Beverage Analysis – July 2015 Update $MNST
24 Companies in the Spotlight This Week – 3/28/15
Monster Beverage Corporation Quarterly Valuation – March 2015 $MNST
27 Companies in the Spotlight This Week – 12/20/14

Other ModernGraham posts about related companies

Mead Johnson Nutrition Co Valuation – November 2015 Update $MJN
Archer Daniels Midland Valuation – November 2015 Update $ADM
The Best Companies of the Food Processing Industry – October 2015
J.M. Smucker Company Valuation – October 2015 Update $SJM
Keurig Green Mountain Inc. Valuation – October 2015 Update $GMCR
Monster Beverage Corporation Analysis – October 2015 Update $MNST
B&G Foods Inc. Analysis – September 2015 Update $BGS
Hormel Foods Corporation Analysis – September 2015 Update $HRL
Dr Pepper Snapple Group Inc Analysis – September 2015 Update $DPS
Sysco Corporation Analysis – September 2015 Update $SYY


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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