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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Monster Beverage (NASDAQ: MNST ) were scaring away investors today, falling as much as 11% after the company missed top and bottom-line estimates.
So what: Sales at the energy-drink company grew just 7.3% in the quarter, to $484.2 million, well below the $501.7 million analysts had expected. That growth rate was down from 16.6% a year ago, and well off the 30% clip it was hitting consistently two to four years ago. Per-share profits also dropped from $0.41, to $0.37, as foreign currency translation, and the termination of a distribution agreement ate into earnings. Even without those items, EPS still would have been flat. Analysts had expected per-share profit of $0.46.
Now what: Legal costs tacked on between $0.01 and $0.02 in per-share expenses, as the energy-drink maker has been forced to vigorously defend its brand. CEO Rodney Sacks blamed the slow quarter, in part, on "ongoing negative publicity in the media questioning the safety of energy drinks." The company even recently took the odd step of suing San Francisico's city attorney for violating its constitutional rights. Despite legal and safety concerns, energy drinks aren't going away, but Monster's blistering sales growth is. After a quarter like this, the stock seems substantially overvalued with a P/E near 30. For a more in-depth look at Monster, and all the pros and cons surrounding the beverage maker, grab a copy of our premium research report, which comes with a full-length historical analysis of Monster's legal troubles. You can get your copy of the report right now. All you have to do is click right here.