Monster Beverage's (NASDAQ:MNST) earnings growth rate lags the 14% CAGR delivered to shareholders

By
Simply Wall St
Published
November 30, 2021
NasdaqGS:MNST
Source: Shutterstock

While Monster Beverage Corporation (NASDAQ:MNST) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. On the bright side the share price is up over the last half decade. In that time, it is up 89%, which isn't bad, but is below the market return of 125%.

In light of the stock dropping 5.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for Monster Beverage

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Monster Beverage achieved compound earnings per share (EPS) growth of 21% per year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NasdaqGS:MNST Earnings Per Share Growth December 1st 2021

We know that Monster Beverage has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Monster Beverage will grow revenue in the future.

A Different Perspective

Monster Beverage shareholders are down 3.3% for the year, but the market itself is up 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 14% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on Monster Beverage it might be wise to click here to see if insiders have been buying or selling shares.

We will like Monster Beverage better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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