2019 marked Monster Beverage’s (MNST) first year posting a net income above $1 billion, and has proven solid growth rates in revenue and net income. The company faces stiff competition in the energy drink market, with dozens of different drinks from PepsiCo, Starbucks, Coca-Cola, Red Bull and others. Monster continues to launch new product lines and new flavor combinations in its existing drinks, and shows no sign of slowing growth in the future.
Monster’s revenue streams have grown consistently in the last five years – up 54.6% overall since 2015. Gross profit margins have followed, up 54.2% since 2015 on a consistent 60% or better margin. Net income has more than doubled, with net margin up 6 percentage points since 2015, boosting net income above $1 billion.
Source: Monster 2019 10-K
Revenue growth has fluctuated between the low double digits, peaking at 13% growth in 2019. Monster’s wide variety of products as well as new product and flavor releases to follow ever-changing consumption trends have hit the spot with consumers, as revenues have yet to show a sub-double-digit growth.
Source: Monster 2019 10-K
Monster’s balance sheet is outstanding, with almost $5.2 billion in total assets and under $1 billion in total liabilities, giving it coverage of current payables and other liabilities. Total assets are up $624 million from 2018 and liabilities only $63 million.
Data from Seeking Alpha
Future Growth Projections
Since Monster’s revenue growth and margins are relatively consistent, we can estimate future net income and EPS. Assuming revenue growth of 9% in 2019 due to coronavirus, which should have minimal impact on sales and distributions, and 11.5% and 10.1% growth in 2021 and 2022 (estimated based on previous growth rates), net income is forecast to reach $1.5 billion and earnings up to $2.79 by 2022. Net margin was estimated to flatten and remain in the 26% range throughout the period. If revenue growth exceeds estimates or net margin grows above 27%, then net income could be slightly higher, and put EPS closer to $3.00, especially if Monster buys back shares before 2022.
Monster’s 4 Pillars of Growth
Management has outlined its key drivers of business growth and how it plans to follow the four in the future.
International – Monster believes that international growth and consumption will remain a key driver of business growth, with one or more of the company’s product lines currently being sold in 153 countries.
Profitability – Marketing and product innovation are very important to growth, and Monster expects to launch more products and alternatives to widen consumer base; the company also seeks to increase profit margins within its segments.
Cost Management – To boost profit margins, Monster is taking steps to reduce packaging, freight and raw material costs associated with production and distribution to decrease operating expenses.
Capital Structure – Monster has increased its working capital and continues to do so to finance expansion and new product growth, as well as to provide access to credit at lower borrowing rates.
Management’s four growth foci have been successful so far, with net margin growing considerably as well as working capital. Although the energy drink market remains highly competitive, Monster acts quickly with new product launches and flavor creations to attract new and maintain old customers. Net income crossed $1 billion, and estimated future revenues and net incomes, with Monster’s consistent growth and margins, has net income increasing to $1.5 billion or higher by 2022. The company is very well positioned with cash and assets on hand, and should continue its solid growth.
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