Hansen Overheated

So what's the surprise? Hansen Natural (NASDAQ:HANS) turned in another huge quarter, driven by record sales of its Monster energy drinks. You can get the details from our Fool by Numbers breakdown, but the brief version of the story is that revenues doubled and earnings per share jumped 130%.

As you already know from the spread between those numbers, margins must have improved, and they did, with the net adding nearly 3 percentage points, to climb to 17.6% of revenues. That kind of performance is why this stock has been a multi-bagger inside a year. Yeah, I was one of those who missed it, too.

But tell you what; I'm going to have to keep on missing it.

On the face of it, Hansen's valuation looks nutty. A beverage maker trading at an enterprise value of nearly 11 times revenue? Fifty-nine times earnings?

You might be saying, "Ahhh, Grasshopper [or 4-letter alternative], it's not the price we pay for the past that matters; it's what we pay for the future."

Hey, I agree with that, but it still doesn't change my mind on this stock. By my calculations, this monster needs to keep growing at better than 34% a year for an entire decade in order to look fairly valued today. Could that happen? Sure. Would I bet my money on it? No freakin' way.

If you believe in that 34%-growth-forever theory, you may want to take a look at a couple of minor data points. Let's start with accounts receivable, which jumped at a much greater clip than net revenues this quarter. That should always be a worry for those who are betting on the big growth story, because it suggests that the sales gains are coming from generous terms rather than just rabid demand.

The other little detail Hansen fans might want to consider comes in the conference call discussion of the canned-smoothie biz. Here, Hansen execs are convinced they've got a premium product, but it hasn't been doing so hot because, to let them explain, "it's been tough to compete."

Should it ever become "tough to compete" in the (to my mind, moatless) energy-drink biz, a lot of shareholders are going to end up wondering why they got chewed up by this monster.

Coke and Anheuser-Busch are Motley Fool Inside Value recommendations. Diageo is an Income Investor pick. Check out our entire suite of newsletters by clicking here.

Seth Jayson simply doesn't chase the next big thing. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.