This Monster Has Mastered the Market in 2012

The first half of 2012 is in the rearview mirror, and investors are gearing up for what looks to be an action-packed ending. There are bound to be some big winners -- and more than a few duds -- no matter what happens in the United States and abroad.

Will your favorite stock have its victory lap as we hit the home stretch, or will it get lapped? First-half performances can hold some clues, so let's look to the recent past to find out whether Monster Beverage (Nasdaq: MNST  ) deserves a place in your portfolio going forward.

First-half recap
Monster has been one of 2012's best performers. Its rise has been steady and virtually uninterrupted from January to the present day, as you can see here:

MNST Total Return Price Chart

MNST Total Return Price data by YCharts

Here are a few financial snapshots of its recent performance:

Market Cap $13.0 billion
Trailing 12-Month Revenue $1.80 billion
TTM Net Income $307 million
TTM Free Cash Flow $310 million
Most Recent Quarterly Revenue $455 million
MRQ Net Income $76 million
MRQ Free Cash Flow $21 million
MRQ Revenue / Net Income YOY Change 27.8% / 38.2%
P/E and Forward P/E 44.4 / 29.2
Price to Free Cash Flow 41.9
Motley Fool CAPS Rating (out of 5) ***

Source: Morningstar.

What the numbers don't tell you
Monster steamed into 2012 as one of the market's most expensive food and beverage stocks. It hasn't looked back, as its current P/E sits about 12 points higher than it did at the start of the year. The company's 2011 annual results puffed more wind into its sails (and cash into its sales), as its new Rehab lineup began eating away at the canned-and-bottled tea segment led by PepsiCo's (NYSE: PEP  ) Brisk and SoBe brands and Dr Pepper Snapple.

Monster seemed to make new 52-week highs with each passing week this year. There weren't many news-based drivers of the company's big momentum, but the news was all gravy. Rumors that Coca-Cola (NYSE: KO  ) might buy Monster never panned out, but that didn't matter, as Monster blasted through analysts' expectations with a strong first quarter.

Those results led to two analyst upgrades in the span of a month, one from UBS upping its price target to $82, the other from Stifel Nicolaus pegging its price target a dollar higher. Monster muscled its way into the S&P 500 in late June, establishing itself as a mid-cap stock with staying power.

Does Monster have nothing but smooth sailing ahead? Not quite. Starbucks (Nasdaq: SBUX  ) and SodaStream (Nasdaq: SODA  ) are just two of the many companies trying to make their mark on the energy drink market. Fool contributor Sean Williams even foresees a future in which Obamacare might undermine Monster's sales. The company's high valuation relative to many of its beverage purveyor peers is also a major issue to watch, particularly if its strong sales growth slows.

I outlined Monster's bull case at the end of February. Since then, the stock's gained 26%. Still, I recognize the challenges ahead, and would pay very close attention to any visible slowdown. Many investors have seen huge gains from Monster. If it's time to find your next multibagger, look no further than The Motley Fool's free report on one transformative medical technology stock ready to explode. Claim your free copy of "The Next Rule-Breaking Multibagger" while it's still available.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.

The Motley Fool owns shares of Starbucks, PepsiCo, SodaStream International, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of Coca-Cola, Monster Beverage, Starbucks, SodaStream International, and PepsiCo. Motley Fool newsletter services have recommended writing covered calls on Starbucks and creating a diagonal call position in PepsiCo. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (2) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 13, 2012, at 7:47 PM, ttouch00 wrote:

    Only 1 issue with Monster as to why its ride is coming to a severe halt. Take a look back at how this Brand started, it was a brand built on the streets through powerful field marketing and sales staff with a get it done attitude. Well, sadly to say, the cash cows have become just that and the street pushers are all milked out. How do I know, well lets just say its no longer transparent. Seems entire field and sales staff has a side gig/job(linkedin). No longer exists the days of 110% effort. Look for a 50% staff effort year in 2013 (70% effort in 2012).

    I noticed on Linkedin(you can call HR as well), there has been absolutely 0 field marketing and sales staff promoted from their position in the last 7 years. Sad for a company that was built in the field. Over 2000% percent growth in 7 years and only 10% internal staff growth. That is one milked out cow.

    Jump off the stage in 2006 and entire staff would have caught you, jump now and you fall to the ground.

  • Report this Comment On August 23, 2012, at 12:22 AM, MHedgeFundTrader wrote:

    While in Zermatt, Switzerland recently, I took the opportunity to undergo my annual physical. Over the years, I have discovered that American doctors are so paranoid about getting sued that I can never get a straight answer about anything, so I do all of my physicals abroad.

    I like visiting Dr. Christian because he is cut from the same cloth as I. He is a small wiry guy without an ounce of fat, and keeps his hair tied behind in a ponytail. Nothing like treating your patients through example. He has served as the team doctor on several Himalayan expeditions, reaching the incredible altitude of 25,000 feet without oxygen. He includes Mount McKinley and Aconcagua on his resume.

    He gave me the good news: I had blood pressure of 110/70 and a resting pulse rate of 50. This was at an altitude of 5,500 feet, which always elevates one’s blood pressure. The bottom line was that I had the heart of a teenaged Olympic athlete. He told me that whatever I was doing, to keep on doing it. I said that would be strapping on a 60 pound backpack and climbing the 1,500 foot mountain in my backyard every night after work. He answered that would explain everything.

    Dr. Christian usually allocates extra time for patients my age to deliver them bad news. That was unnecessary in my case. So we killed time trading notes on our favorite climbs.

    I also grilled him on the state of the Swiss medical system. He complained that it was going downhill, but was nowhere near as bad as in the US, where his brother practices medicine. Everyone here gets medical care after paying a small premium. His liability insurance was only $3,000 a year, compared to $100,000 in the US. The only malpractice suits in Switzerland are brought by Americans, and they always lose.

    The main reason medical costs were so low is that the people of Switzerland were so much healthier. Walking around the streets here, most people look like they are triathletes. And they do this despite smoking like chimneys. Maybe they are related?

    Life expectancy in Switzerland is 82.2 compared to only 78.2 in the US. And the quality of life at old age is much better. Obesity is rampant at home, but rare in the Alps. Diabetes is unusual in Switzerland, but epidemic in the US. Over 400,000 Americans undergo kidney dialysis in the US, while the treatment is almost unheard of in Europe. This is why the US is spending 12% of GDP on health care, on its way to 17%, while Switzerland is flat lining at 8%, with an older population.

    I thanked Dr. Christian for his advice. The total bill? $200. I headed to the local pharmacy to get a one year supply of my anti-cholesterol drug, which I can buy 90% cheaper than at home. That allows me to keep my total health care costs under $500 a year.

    I then celebrated my good fortune by stepping across the street for a bratwurst and a beer, which my American doctor once banned me from. There, I planned my coming assault on the Matterhorn.

    . The Mad Hedge Fund Trader

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