Shares of Monster Beverage (Nasdaq: MNST ) hit a 52-week high on Friday. Let's look at how it got here and whether clear skies are ahead.
How it got here
Monster has taken its share of energy drinks this year, charging past its more traditional competition. As hard as they try, Coca-Cola (NYSE: KO ) and PepsiCo (NYSE: PEP ) haven't been able to take hold of the energy market that's dominated by Monster, Red Bull, and 5-Hour Energy.
Financially, the results have been outstanding. In the fourth quarter, revenue grew 28.4% to $467.3 million, and net income rose 31.4% to $64.5 million. This has translated into market-beating returns over the last year for investors as well.
Monster is by no means a cheap stock at this point, trading at 43 times trailing earnings, but the company has a long history of growth. The only problem is that when you're trading at that level, the market has perfection priced in, and Monster doesn't have as diverse a product line to fall back on as Pepsi or Coke do. The company will have to continue growing at a rapid pace for the stock to stay at its new high.
I don't see an end to Monster's growing ways as it expands its product line and the energy drink business grows. New international markets are starting to open up and that should fuel the next wave of growth.
The one concern I have is the premium that the stock is trading at, although it's something Monster and its old incarnation Hansen Natural are used to. I'm cautiously optimistic the stock can move higher, but not confident enough to make a CAPScall right now. It may not be as exciting, but I like Pepsi with a 16 P/E ratio and a 3% dividend over Monster at its current price.