One of the top players in the beverage space, Monster Beverage Corporation (MNST), has made a name for itself operating through its brands Monster Energy, Java Monster, Mutant Super Soda, Samurai, BPM and Full Throttle, among others. But its sales took a hit amid the COVID-19 pandemic because  sporting events were cancelled, and movie theaters were closed. Even though the stock has gained nearly 11% over the past six months, it has lost 1.4% over the past month.

As  economic activities begin picking up, the company is expected to gain from increasing demand for energy drinks. However, it faces intense competition from other top players in the beverage industry.

Here are the factors that we think could influence MNST’s performance in the coming months:

Impressive Historical Growth

MNST’s stock has gained nearly 96% over the past five years and 54.8% over the past three years, due primarily to its dominant position in the beverage space. The company’s sustained product launches over the  years have helped drive  its growth. In fact, its revenue has grown at a CAGR of 10.9% over the past three years. MNST’s EPS and ebitda  have also grown at CAGRs of 23% and 9.7%, respectively, over this period.

Robust Financials

For the fourth quarter, ended December 31, 2021, MNST’s net sales increased 17.6% year-over-year to $1.20 billion. Net sales for the company’s Monster Energy Drinks segment, which includes primarily its Monster Energy drinks and Reign Total Body Fuel high performance energy drinks, increased 17.7% year-over-year to $1.12 billion for the quarter.

Furthermore,  its gross profit for the quarter came in at $690.68 million, an increase of more than 13% year-over-year; its net income  increased 85% year-over-year to $471.74 million. Also,  MNST has surpassed consensus EPS estimates in three of the trailing four quarters.

Intense Competition

While MNST has improved its sales for at-home consumption, its on-premises food service continues to suffer. Furthermore,   a few companies dominate the beverage space, making it very  competitive for MNST. While PepsiCo, Inc. (PEP) has gained 1.9% over the past month, MNST has lost 1.4%. MNST also faces stiff  competition from The Coca-Cola Company (KO) and Coca-Cola European Partners plc (CCEP).

POWR Ratings Don’t Indicate Enough Upside

MNST has an overall C rating, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. MNST has a C grade for Growth also. This is consistent with analysts’ expectations that its revenue and EPS will increase at a modest rate.

We have also graded MNST for Value, Momentum, Stability, Sentiment, and Quality. Get all MNST’s ratings here.

MNST is ranked #6 of 35 stocks in the C-rated Beverages industry.

Better than MNST: Click here to access five top-rated stocks in the same industry.

Bottom Line

The company is expected to perform well in the long-term based on its solid financials and continuous product innovation. However, it’s sales were adversely impacted by the pandemic and it continues to face intense competition. So, as the economy gradually re-opens it remains to be seen if the company can  revive its sales from its on-premises segment amid the stiff competition. Hence, we think it is better not to invest in the stock right now.

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MNST shares were trading at $89.44 per share on Tuesday morning, up $0.39 (+0.44%). Year-to-date, MNST has declined -3.29%, versus a 5.05% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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