Is Monster Beverage Corporation (NASDAQ:MNST) Potentially Undervalued?

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. However, what if the stock is still a bargain? Let’s examine Monster Beverage’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Monster Beverage

Is Monster Beverage Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% below my intrinsic value, which means if you buy Monster Beverage today, you’d be paying a fair price for it. And if you believe the company’s true value is $63.58, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Monster Beverage’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Monster Beverage generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 57% over the next couple of years, the future seems bright for Monster Beverage. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on MNST, now may not be the most optimal 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Monster Beverage, and understanding it should be part of your investment process.

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.