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Monster competition: Monster's energy drinks are obviously big business, and good business, too. However, the company faces competition from everyone from small beverage companies to giants Coca-Cola (NYSE: KO ) , PepsiCo (NYSE: PEP ) , and Dr Pepper Snapple, not to mention upstarts like SodaStream (Nasdaq: SODA ) .
Coke's Full Throttle, PepsiCo's AMP Energy, Starbucks' (Nasdaq: SBUX ) new Starbucks Refreshers, and Dr Pepper Snapple's Venom product lines are all energy drinks. And of course, there's the mother of all energy drinks, Red Bull. SodaStream provides a syrup flavor for its home-based drink makers that's touted as a comparable alternative to Red Bull, in fact. And let's not forget good old 5-Hour Energy Shots.
If you check out Monster's Form 10-K filed with the SEC, the list of competitive beverages is extremely formidable. There are also all manner of beverages that vie for the honor of quenching consumers' thirsts, including good, old-fashioned soda pop, iced tea, or water, not to mention scores of newfangled concoctions with all kinds of additives and purported positive health effects.
Health issues: As my colleague Sean Williams recently pointed out, sugary beverages and fatty foods of all kinds will soon be on the government's radar. He indicated Monster Beverage could be a surprising potential loser after Obamacare.
Even worse, some research has linked energy drinks' long-term use to cardiovascular problems, not to mention the potential risk of serious health issues for youth. Many companies have already felt the sting of negative public opinion when their product is viewed as even a little bit unhealthy, particularly for kids.
One monstrous run: Monster's shares have soared to spectacular highs. Its multiples are currently pretty scary. Monster's stock trades at 29 times forward earnings and sports a PEG ratio of 2.41. For a cheaper upstart in the highly competitive world of beverages, look to SodaStream, which I recently purchased for the real-money portfolio I'm managing for Fool.com. It trades at just 15 times forward earnings and has a PEG ratio of 0.65, signaling an undervalued stock.
Given that Monster faces a slew of competition and the possibility of a changing tide in the American view of healthy behavior and consumption, I'd say now is a perfect time for Monster shareholders to take the money and run.
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