Assessing Monster Beverage After Strong 37.7% Rally and Alcoholic Expansion News

• Ever wondered if Monster Beverage is really worth its current price, or if there is an opportunity hiding in plain sight for investors who dig a little deeper?
• After closing at $72.04, the stock has moved up 1.0% over the last week and gained 3.3% in the last 30 days. It has also posted a strong 37.7% year-to-date performance and a hefty 33.3% gain in the past year.
• Recent headlines about Monster Beverage’s expansion into the alcoholic beverage space and ongoing distribution deals have kept the stock in the spotlight. These developments have sparked conversations about both growth potential and execution risks, helping to explain the recent price momentum and increased attention from analysts and investors alike.
• Despite all this excitement, Monster Beverage currently has a valuation score of 0 out of 6, indicating it is not flagged as undervalued on any of the standard checks. We will break down those valuation approaches next, but stick around because there is an even smarter way to cut through the noise coming up at the end of the article.

Monster Beverage scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Monster Beverage Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future free cash flows and discounting them back to today’s dollars. This approach aims to determine what Monster Beverage is really worth based on its ability to generate cash in the years ahead.

For Monster Beverage, the latest reported Free Cash Flow is $1.92 Billion. Analysts have provided annual forecasts for the next five years, with projections showing cash flow gradually increasing. By the year 2029, forecasts show Free Cash Flow could rise to about $2.36 Billion, continuing to climb further in later extrapolations.

All cash flows are calculated in US Dollars using the 2 Stage Free Cash Flow to Equity model. Simply Wall St extends those projections beyond what analysts provide, estimating steady growth but with increasingly conservative increases after the first five years.

The result of this DCF analysis suggests Monster Beverage’s intrinsic value is $62.09 per share. With the current market price at $72.04, the stock is trading roughly 16.0% above its fair value, which indicates it is overvalued according to this method.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Monster Beverage may be overvalued by 16.0%. Discover 919 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Monster Beverage.

Approach 2: Monster Beverage Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is widely regarded as the most suitable valuation metric for profitable companies like Monster Beverage. Since this approach connects a company's share price to its actual reported earnings, it gives investors an intuitive sense of how much they are paying for each dollar of profit.

However, what constitutes a “normal” or fair PE ratio is shaped by many factors. Companies with stronger growth prospects or lower risk profiles often command higher PE ratios, while those facing uncertainty or slower growth generally trade at lower multiples. In essence, the PE ratio reflects the market’s expectations for future earnings potential and risk.

At present, Monster Beverage trades at a PE ratio of 40.76x, a level that is far above the beverage industry average of 17.69x and the average PE of its closest peers, which is 22.53x. This indicates that investors are willing to pay a substantial premium for Monster’s earnings compared to sector standards.

Simply Wall St introduces the concept of a “Fair Ratio,” which goes beyond simple industry or peer comparisons. The Fair Ratio for Monster Beverage is 22.83x, reflecting factors such as its projected earnings growth, high profit margins, large market cap, and business risks. Because it integrates company-specific and broad industry data, this proprietary metric offers a more tailored reference point than basic averages.

Bringing together these factors, Monster’s current PE multiple of 40.76x is significantly higher than its Fair Ratio of 22.83x. This suggests the stock is overvalued when assessed by this approach.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1420 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Monster Beverage Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives, a new approach that empowers investors to connect a company's backstory and future prospects directly to financial forecasts and fair values.

A Narrative is a concise story you create about a company, combining your own perspective on its business potential with your assumptions about future revenue, earnings growth, and margins. Essentially, it sets the scene for your investment stance and translates it into a forecast and an estimated Fair Value.

This personalized approach helps investors see beyond just the numbers, making it easier to judge if a stock looks like a bargain or is getting ahead of itself by comparing your Narrative-driven Fair Value against the current share price.

Narratives are accessible to everyone in the Simply Wall St Community, used by millions, and they update automatically as news or earnings arrive. This means your thesis evolves with the business in real time.

For instance, looking at Monster Beverage, one Narrative currently values the stock at $75 per share based on optimism for product innovation and global expansion, while another calls for just $50 due to worries about margin pressure and competition. This demonstrates how investors with different outlooks can see opportunity or caution in the same company.

Do you think there's more to the story for Monster Beverage? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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