Coca-Cola (KO 1.13%) is a globally recognized brand. Monster Beverage (MNST 0.67%) is well known, but probably more among younger people than older ones.
Over the past year, Monster Beverage's 45% stock gain has trounced Coca-Cola's 12% advance. Before you buy the outperformer, however, you'll want to think about some key statistics.
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What does Coca-Cola do?
Coca-Cola is the world's largest non-alcoholic beverage company, with a vast portfolio of brands spanning virtually all beverage categories. It is the fourth-largest consumer staples company on the planet, with a market cap of roughly $300 billion. As a business, Coca-Cola can stand toe to toe with any of its consumer staples peers with regard to its brand portfolio, innovation skills, marketing prowess, and distribution capabilities.
NYSE: KO
Key Data Points
Moreover, the company's vast size allows it to act as an industry consolidator. Simply put, it can use acquisitions to quickly add new brands and beverage concepts to its lineup. The enduring strength of the business is shown in its status as a Dividend King, with more than six decades of annual dividend increases. It is tied for the fifth-longest dividend streak, at 63 years and counting. Without question, Coca-Cola is a great business.
What does Monster Beverage do?
Monster Beverage also makes beverages. However, unlike Coca-Cola's diverse portfolio, its lineup is largely focused on niche drink categories. Its biggest focus is on energy drinks, but it also sells water and craft beers. Essentially, it's more of a specialist, which makes sense given that it is a relative newcomer to the beverage sector. Essentially, it is using a hot brand in a new beverage niche to build out a broader business. Due to this growth focus, the company doesn't pay a dividend.
It is also at the opposite end of the spectrum in terms of size and business capabilities. For example, Monster Beverage's roughly $75 billion market cap is big, but it's still just a fraction of the size of Coca-Cola. In fact, Coca-Cola's distribution network is actually a key partner for Monster Beverage, distributing its products worldwide. That's not exactly a knock against Monster Beverage, but it highlights that the company doesn't have nearly the same scale and reach as an industry giant like Coca-Cola.
What is growth worth?
It shouldn't come as any surprise that Monster Beverage has been growing more quickly than Coca-Cola. It's easier to grow from a smaller base. That said, the growth statistics are very different. Through year-end 2024, Monster Beverage's sales and earnings both grew at a compound annual rate of about 12%. However, the growth rate over more recent periods has been much slower, which is to be expected as the company has increased its scale.
In comparison, the top line of Coca-Cola's income statement has remained relatively stable over the past decade, with bottom-line growth coming in at a compound annual rate of around 4%. That said, Coca-Cola's revenues have been more resilient over shorter periods than the 10-year annualized number would suggest. Earnings growth tends to be fairly reliable, too. This is what you would expect to see from a stable industry giant.
NASDAQ: MNST
Key Data Points
So a growth investor will likely find Monster more appealing. There's just one small problem. Monster's price-to-sales, price-to-earnings, and price-to-book value ratios are all above their five-year averages. From a valuation perspective, the stock looks historically expensive. Coca-Cola, in contrast, looks reasonably priced. Its P/S ratio is in line with its five-year average, and its P/E and P/B ratios are below their five-year averages. Add in an above-market dividend yield of 2.9%, and conservative dividend investors will probably find Coca-Cola far more appealing than Monster Beverage.
There's one more nuance to consider
The valuation references above compare each company to its own history. What's also important to remember here is that Monster Beverage's 44x P/E ratio is much higher on an absolute basis than Coca-Cola's 23x. That difference is probably appropriate given the different life stages of each business.
However, even if Monster Beverage's P/E reverts to its long-term average of roughly 37x, it will still be relatively expensive compared to Coca-Cola. That will probably be a turnoff for investors who have a value focus. That said, value investors may find it interesting that Coca-Cola owns around 21% of Monster Beverage. Essentially, you can benefit from Monster Beverage's growth with an investment in the more reasonably valued Coca-Cola.
