Monster Beverage Corp (MNST)

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Is Monster Beverage Corporation (MNST) Potentially Undervalued?
By: Simply Wall St | April 27, 2021

Let's talk about the popular Monster Beverage Corporation (NASDAQ:MNST). The company's shares saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Monster Beverage’s outlook and valuation to see if the opportunity still exists.

What's the opportunity in Monster Beverage?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.29% above my intrinsic value, which means if you buy Monster Beverage today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $90.54, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Monster Beverage’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Monster Beverage?


NasdaqGS:MNST Earnings and Revenue Growth April 27th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Monster Beverage's earnings over the next few years are expected to increase by 23%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? MNST’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on MNST, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

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