Opportunities and risks
Opportunities
Industry growing at 8% p.a., numerous growth drivers: More customers, more cans consumed per customer, better availability/more shelf space, introduction to new markets
Monster Beverage is gaining market share: The Group has already become the No. 1 player in the USA, international business is growing at 15-20 % p.a. - partly due to the distribution partnership with Coca-Cola
Highly profitable business model: Extraordinarily high cash generation through outsourcing of production and distribution
Extremely solid balance sheet: Equity ratio of 82% and net cash position of USD 2,100 million
Excellent management: Rodney Sacks and Hilton Schlosberg have been in office for more than 20 years and own 8.2 % of the outstanding shares
Outstanding track record: More than 20% annualized return over the last 20 years, revenue up every year since Monster Energy was launched
Risks
Industry growth could slow down:No sign of this at present, but one day the amount of energy drinks consumed globally will level off at a certain level. If profitability only grows by 2-4% per year, investors will no longer pay a 30 P/E ratio
Founders withdraw: Rodney Sacks has already moved to the Supervisory Board, Hilton Schlosberg is also already 73 years old. It is unclear what will happen next
Loss of market share due to new competitors: Celsius Holdings has managed to achieve a market share of 15% in the USA. The products are positioned as a healthier and more natural alternative to classic energy drinks
Valuation based on the P/E ratio
Over the last 20 and 10 years, Monster Beverage has been valued at an average P/E ratio of 30 and 34 respectively.
This average corresponds almost exactly to the current valuation level (P/E ratio 32, 2026e).
Based on the P/E indicator, the Monster Beverage share appears fairly valued.
Whenever the P/E ratio has fallen to 25, there has been a particularly cheap entry opportunity in the past 15 years. This would require the price of a share to fall to USD 52.50
Conclusion: Monster Beverage shares are an excellent buy-and-hold quality stock
Operational development
Monster Beverage is a growth stock straight out of a picture book: around 10% annual profit growth, 30% EBIT margin, hardly any capital tied up and a debt-free balance sheet.
Widespread tiredness in society (ever more screen time due to smartphones, streaming services and video games) is at the expense of sleep duration. The sleep deficit is compensated for by an ever-increasing consumption of caffeinated drinks.
An end to this growth trend is not yet in sight in any relevant sales market. As consumers are also very loyal to the brand, there are many indications that the profitable growth trend will continue in the long term.
The distribution partnership with Coca-Cola enables Monster Beverage to gain global market share.
Valuation
No question, with a P/E ratio of 32 (2026e) and a free cash flow yield of 2.8% (2026e), Monster Beverage shares are anything but cheaply valued compared to the current earnings power.
However, the company is in a position to grow into the valuation level through strong earnings growth.
Conclusion: Monster Beverage shares are an excellent buy-and-hold quality stock
Operational development
Monster Beverage is a growth stock straight out of a picture book: around 10% annual profit growth, 30% EBIT margin, hardly any capital tied up and a debt-free balance sheet.
Widespread tiredness in society (ever more screen time due to smartphones, streaming services and video games) is at the expense of sleep duration. The sleep deficit is compensated for by an ever-increasing consumption of caffeinated drinks.
An end to this growth trend is not yet in sight in any relevant sales market. As consumers are also very loyal to the brand, there are many indications that the profitable growth trend will continue in the long term.
The distribution partnership with Coca-Cola enables Monster Beverage to gain global market share.
Valuation
No question, with a P/E ratio of 32 (2026e) and a free cash flow yield of 2.8% (2026e), Monster Beverage shares are anything but cheaply valued compared to the current earnings power.
However, the company is in a position to grow into the valuation level through strong earnings growth.
Personal approach
As an anticyclical long-term investor, I am waiting for a price decline as a result of a market overreaction towards P/E 25 or towards 50$.
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