3 Reasons Investors Love Monster (MNST)

Monster has had an impressive run over the past six months as its shares have beaten the S&P 500 by 14.5%. The stock now trades at $75.54, marking a 19.2% gain. This run-up might have investors contemplating their next move.

Following the strength, is MNST a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.

Why Is Monster a Good Business?

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 profitability metric because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.

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 27.7%. 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

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

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% 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 35.7%, 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 we think Monster is one of the best consumer staples companies out there, and with its shares outperforming the market lately, the stock trades at 33.9× forward P/E (or $75.54 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

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