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Monster Beverage (NASDAQ:MNST), formerly Hansen Natural Corporation, has successfully emerged as the world's second-largest energy drink company behind privately held Red Bull. Despite the recent gain, MNST is underperforming with 7.67% YTD as of April 11, 2013 compared with the NASDAQ with a 11.48% advance. Monster Beverage had been hampered by safety claims over its energy drinks in the past few months, but now it may be due for a very bullish run.

Gaining Market Share

According to a note from SunTrust, Nielsen data showed Monster Beverage made market share gains and accelerated its growth rate in March. Prior, Nielsen convenience store data also showed that the energy drink category was up 6% for the four weeks ended February 16, 2013, while MNST outpaced the group at +7.4% and resumed its share gains.

New Buyback

On April 8, 2013, MNST' Board of Directors had authorized a new share repurchase program for the repurchase of up to $200 million of the company's outstanding common stock. There was no availability remaining under the previously authorized $250 million share repurchase program. Based on the last closing price of $55.86 on April 11, 2013, up to 3.58 million shares can be repurchased. MNST currently has 165.55 million total shares outstanding.

Analysts' Calls and Estimates

Stifel analyst Mark Astrachan is very bullish on MNST's international sales and predicted that MNST' international profits will jump 50-fold over the next three years. Mark Astrachan said on April 11, 2013, that Monster's annual operating profits from sales outside of the U.S. will increase from $5M last year to $101M in 2015, and the international operating margins will increase from 1.1% to 13.4%.

Analysts currently have a mean target price of $60.00 for MNST, suggesting 7.41% upside potential based on the closing price of $55.86. Analysts, on average, are estimating an EPS of $0.47 with revenue of $502.28M for the current quarter ending in March, 2013. For 2013, analysts are projecting an EPS of $2.26 with revenue of $2.32B, which is 12.70% higher than 2012.

Fundamentally, MNST's key stats will be compared to its peers, including Coca-Cola Co (NYSE:KO), PepsiCo Inc. (NYSE:PEP), and Dr Pepper Snapple Group, Inc. (NYSE:DPS), as seen from the table below.

Monster Beverage

Coca-Cola

PepsiCo

Dr. Pepper Snapple

Market Cap

$9.25B

$183.53B

$123.36B

$9.69B

Revenue Growth (3 Year Average)

21.7

15.7

14.8

2.7

Operating Margin, %, ttm

26.7%

22.4%

13.9%

18.2%

Net Margin, %, ttm

16.5%

18.8%

9.4%

10.5%

ROE

41.9

28.0

28.8

27.7

Debt/Equity

0

0.4

1.1

1.1

P/E

29.5

20.8

20.4

15.9

Forward P/E

18.3

17.0

16.0

13.8

P/FCF

38.81

56.12

50.76

N/A

Source: Morningstar

Comparing to three other companies, MNST has higher revenue growth, operating margin and stronger ROE. MNST only lags KO for its net margin. MNST also has a healthy balance sheet with $319.56M total cash and zero total debt. Surprisingly, MNST also offers cheaper free cash flow (P/FCF of 38.81) compared with KO and PEP. Below, MNST's EPS estimates for the next three fiscal years will be compared with its peers.

(click to enlarge)

Source: YCharts.com

While EPS is expected to grow for all three companies for the next three fiscal years, MNST's EPS is expected to grow at the fastest rate, surpassing DPS's EPS and reaching $4.25 per share by the end of 2016.

Technically, the MACD (12, 26, 9) indicator is showing a bullish trend. The momentum indicator, RSI (14) is picking up and indicating a strong buying momentum at 72.73, where above 70 is considered as overbought. MNST is currently trading above its 200-day MA of $54.48 and 50-day MA of $49.08, as seen from the chart below.

(click to enlarge)

Source: StockCharts.com

Bottom Line

While the safety concern may depress the stock in the near term, MNST's share price will be supported if the company continues to gain market share. With high revenue growth and margins, as well as strong ROE, MNST remains an attractive growth story, supported by its solid balance sheet. If MNST can hold above its 200-day MA, more upside is expected in the near term. Alternatively, for investors seeking income and dividend, KO and PEP are better investment targets.

Note: Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Source: Unleash The Growth, Monster Got It All