Foolish Forecast: Hansen's Gorgeous Growth Will Go On

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Three months ago, Hansen Natural (Nasdaq: HANS) seemed poised to outperform both Wal-Mart (NYSE: WMT) and the overall market. Waddya know -- the energy drink mixer has gained 19% since then while everything else went deep-sea diving. Can Hansen continue to beat the market after Thursday night's third-quarter report?

What Fools say:
Here's how Hansen's CAPS rating stacks up against some of its peers and competitors:

Company	Market Cap (billions)	Trailing P/E Ratio	CAPS Rating
Coca-Cola (NYSE: KO)	$124.8	21.9	****
Pepsico (NYSE: PEP)	$106.4	19.0	*****
Dr Pepper Snapple Group (NYSE: DPS)	$5.7	11.6	****
Hansen	$2.4	13.9	****
Jones Soda (Nasdaq: JSDA)	$0.07	N/A	**

Data taken from Motley Fool CAPS on 11/04/2008.

The beverage industry looks like a pretty sweet sector right now -- unless your name is Jones.

There's only one fairly recent criticism of Hansen in our CAPS community, and even that one is over two months old now. Moreover, CAPs member imphasing, who is the bear in question still thinks that it's a "good long term buy" that just faces headwinds in the economy. "People are looking for cheap, not natural."

The bulls are much more vocal, including CAPS all-star HLChin who forecasts slower growth but "share buyback plus the partnership deals with Pepsi and [Anheuser-Busch] give solid ground to his company."

What management does:
Since early 2007, when the distribution agreement with Anheuser-Busch (NYSE: BUD) was signed, you see the breathless sales growth slowing down a bit -- but the net profits are growing like dollar weeds. To me, that looks like economies of scale kicking in. It's tougher to tack on big percentage gains on already-big sales, but the resulting gross profit trickles down through fairly fixed operational expenses and multiply much faster on the bottom line.

Margins	3/2007	6/2007	9/2007	12/2007	3/2008	6/2008
Gross	52%	52.2%	52.2%	51.7%	51.2%	51.1%
Operating	23.9%	24.6%	26.3%	25.3%	25.2%	24.8%
Net	14.9%	14.5%	15.6%	16.5%	16.6%	17.2%
FCF/Revenue	15.1%	13.7%	12.2%	14.5%	11.4%	15.4%

Growth (YOY)	3/2007	6/2007	9/2007	12/2007	3/2008	6/2008
Revenue	59.5%	54.5%	46.5%	49.3%	45.9%	33.4%
Earnings	29.4%	21.8%	34.3%	52.5%	62.8%	58.6%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Hansen can be a volatile stock to follow. It's up since the last report, but down more than the S&P 500 since the last round of great news -- Hansen's distribution network now leans on Coca-Cola (NYSE: KO) and its affiliates, too. Nearly the entire industry is helping Hansen sling its sales in one market or another now.

You can clearly see how Hansen's growth is staying far ahead of the skimpy P/E ratio. If Wall Street was a rational place that rewarded great business performance with great share price multiples, then this growth-to-value imbalance would soon be corrected. Right now, it's more like a lunatic asylum where you never know what to expect.

I say you should enjoy the mispricing while it lasts. Mr. Market will come to his senses eventually, rewarding the brave souls who struck when the iron was hot. This week's report could be great -- and send the shares to Hades. It could also disappoint but reap hefty price gain rewards.

Don't try to play it. If you like growth investing, Hansen might be for you. Just jump in when the price is right. That could be today, if you ask me; the opportunities ahead of this company outweigh the risks by a good margin.