Monster trades at $44.36 and has moved in lockstep with the market. Its shares have returned 12.3% over the last six months while the S&P 500 has gained 12%.
Is MNST a buy right now? Find out in our full research report, it’s free.
Why Are We Positive on MNST?
Founded in 2002 as a natural soda and juice company, Monster Beverage (NASDAQ: MNST) is a pioneer of the energy drink category, and its Monster Energy brand targets a young, active demographic.
1. Operating Margin Reveals a Well-Run Organization
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Monster has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer staples business, boasting an average operating margin of 28.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Monster has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 23.4% over the last two years.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Monster’s five-year average ROIC was 35.4%, placing it among the best consumer staples companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons why Monster is one of the best consumer staples companies out there. At $44.36 per share (or 34.7× forward P/E), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
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