At US$89.07, Is It Time To Put Monster Beverage Corporation (NASDAQ:MNST) On Your Watch List?

Today we're going to take a look at the well-established Monster Beverage Corporation (NASDAQ:MNST). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$99.62 and falling to the lows of US$86.77. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Monster Beverage's current trading price of US$89.07 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Monster Beverage’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Monster Beverage

What Is Monster Beverage Worth?

Monster Beverage appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Monster Beverage’s ratio of 38.28x is above its peer average of 26.05x, which suggests the stock is trading at a higher price compared to the Beverage industry. Another thing to keep in mind is that Monster Beverage’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

Can we expect growth from Monster Beverage?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Monster Beverage's earnings over the next few years are expected to increase by 60%, 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? It seems like the market has well and truly priced in MNST’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe MNST should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on MNST for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for MNST, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Monster Beverage as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Monster Beverage and you'll want to know about this.

If you are no longer interested in Monster Beverage, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.