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Hansen Natural (HANS) is a beverage company that plays a slightly counter-culture tune to great success. While its namesake natural sodas have long been a staple for the granola crowd, Hansen's edgy Monster-brand resonates with the youth market that has shunned mainstream brands like Coke (NYSE:KO) and Pepsi (NYSE:PEP) and turned energy drinks into a $6 billion market.

The success of Monster has fueled tremendous growth for Hansen. The company's 2006 sales are estimated at $603 million, up from $17 million in 1992 when current management took over. Monster accounts for 80% of revenues. Hansen also has one of the best stock performances in recent history, up approximately 6000% in the past five years. Monster is a strong number two in energy drinks, and it is rapidly gaining ground on Red Bull which dominated the category when it first came onto the American scene in 1997.

Last year, HANS finally took a tumble when it couldn't sustain the breakneck pace of growth. A new distribution deal with Anheuser-Busch last year caused some hiccups, but the relationship should be a long-term winner that solidifies Monster's market position. The stock dropped from a split-adjusted $52.72 peak to less than $30 toward the end of 2006, but analysts are still forecasting some impressive numbers for this company. Revenue is expected to grow from less than $400 million in 2005 to $603 million in 2006, followed by $825 million in 2007. The consensus on earnings is for $1.11 per share in 2006 (up 58%), and $1.53 in 2007. The 5-year average growth rate is seen at 36.5% for EPS.

Hansen offers a variety of beverages ranging from Hansen's Natural soda, which feature no caffeine, no preservatives, and no artificial flavor or color, to Monster which boasts more than three times the caffeine of a Coke Classic. It also makes fruit juices, sports drinks, and smoothies. The Hansen Natural brand has been around since 1935, but the energy drink line has been the driving force since it was introduced in 1996.

The success of its Monster brand, along with some savvy moves like offering 16-ounce cans for roughly the same price as Red Bull's 8-ouncers, have turned Hansen into a $3 billion company based on market capitalization. That's still a far cry from Coke and Pepsi, each of which are valued in excess of $100 billion. For growth junkies, though, Hansen hits the spot. With the stock at $33.92 currently, HANS is trading at 6.4 times sales and 22 times forward earnings, a noteworthy discount to its growth rate.

HANS 1-yr chart

HANS

Hansen is quickly emerging from the small-cap shadows. Analysts coverage on this stock has jumped from four to six since we wrote about it in June. Four of them rate HANS a Strong Buy. There are some regulatory concerns about stock options and even some health concerns related to the energy drink category, but so far these issues don't seem to trouble the type of investors attracted to a growth story like Hansen. The issue of managing and sustaining such rapid growth is really the key for a stock like this, so smoothing out its new distribution relationship with Anheuser-Busch (NYSE:BUD) would be a good start. Hansen is barely a blip on the radar of beverage giants Coca-Cola and PepsiCo, but even they are seeing the potential of the energy drink category now, where Hansen has crafted a very profitable position.

Disclosure: Author has no position in HANS.

Source: Hansen Natural Hits The Spot