Monster Beverage Corporation: A fantastic growth story.

Monster Beverage Corporation is a global leader in energy drinks, known for its bold branding, loyal customer base, and impressive track record. The company has been fantastic for shareholders, as it was the best-performing stock from 2000 to 2020 - turning a $100 investment in 2000 into $62.000 twenty years later. With a growing international footprint, an expanding portfolio that includes performance energy and alcoholic beverages, and a consistent focus on innovation, Monster is adapting to a changing market while continuing to build on its strengths.

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.

For full disclosure, I should mention that I do not own any shares in Monster at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Monster, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Monster Beverage Corporation is a leading producer of energy drinks and alternative beverages. Originally founded as Hansen’s in 1935, the company began by selling juices and natural sodas. It wasn’t until 2002 that it entered the energy drink space with the launch of its first Monster Energy drink. In 2012, the company changed its name to Monster Beverage Corporation, and in 2015, it sold its non-energy drink brands to Coca-Cola to focus entirely on the fast-growing energy category. The business is now organized into four segments. The largest, Monster Energy Drinks, accounts for around 90% of revenue and includes the company’s flagship Monster Energy line, Reign high-performance beverages, Reign Storm wellness drinks, Bang Energy, and Monster Tour Water. The Strategic Brands segment includes affordable energy drinks such as Predator and Fury, as well as legacy brands like NOS and Full Throttle acquired from Coca-Cola in 2015. The Alcohol Brands segment includes hard seltzers and craft beers brought in through the 2022 acquisition of CANarchy and the launch of The Beast Unleashed. Finally, the Other segment consists of products sold through its subsidiary American Fruits and Flavors. Monster’s products are distributed in over 150 countries through Coca-Cola’s global bottling system. This partnership, which began in 2015 when Coca-Cola also acquired a significant equity stake in Monster, gives the company a unique edge in global reach and scalability. The company uses an asset-light model, outsourcing most of its manufacturing to third-party co-packers while focusing its efforts on marketing, product development, and branding. Over the years, Monster has built a strong competitive moat centered on brand power, scale, and distribution. Its brand is especially resonant with young males aged 18 to 32 and is tightly linked to extreme sports, gaming, and music culture. The 16-ounce can, designed to offer more value than Red Bull’s smaller cans, became an iconic part of the brand’s positioning. Monster has cultivated deep customer loyalty and high brand recognition across global markets. The partnership with Coca-Cola offers significant advantages in scale and operational efficiency, enabling Monster to reach new markets quickly and reliably. Its efficient cost structure, driven by outsourced production and logistics, supports high gross and net margins relative to peers in the beverage industry. By continually expanding into adjacent categories such as wellness energy, coffee-energy hybrids, and alcoholic beverages, Monster has diversified its portfolio while maintaining its focus on youth-oriented, high-energy branding.

Management

Rodney C. Sacks and Hilton H. Schlosberg serve as Co-CEOs of Monster Beverage Corporation, a leadership structure that sets the company apart from most of its peers. Their partnership dates back to the early 1990s when a consortium led by the two acquired Hansen’s, the predecessor to Monster Beverage. Rodney C. Sacks has served as CEO since the acquisition, while Hilton H. Schlosberg was appointed Co-CEO in January 2021 after holding several key roles at the company, including CFO, COO, and President. Both are graduates of the University of the Witwatersrand in Johannesburg and have played a defining role in Monster’s transformation from a niche natural soda brand into a global energy drink powerhouse. Under their leadership, Monster Beverage has achieved exceptional long-term performance. From 2000 to 2020, Monster was the best-performing U.S. stock, with a $100 investment growing to $62.000 over that period. Their strategic decision-making - such as launching the Monster Energy brand in 2002, selling non-energy assets to Coca-Cola in 2015, and expanding into alcoholic beverages in 2022 - has consistently positioned the company at the forefront of innovation and growth within the beverage industry. The leadership philosophy of Sacks and Schlosberg emphasizes differentiation, adaptability, and disciplined execution. Monster’s success is deeply rooted in its ability to create distinct, visually impactful brands supported by lifestyle-driven marketing in areas such as extreme sports and gaming. Sacks has underscored the importance of flexibility in innovation, noting, “You got to be able to do that quickly without excessive costs sunk into the project,” referring to the ability to change direction quickly when developing new products. On June 12, 2025, Rodney C. Sacks will resign from his role as Co-CEO, concluding more than three decades of visionary leadership. Hilton H. Schlosberg will continue to lead the company. The combination of the management team's historical performance and values gives me a great deal of confidence in their abilities.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Monster has consistently achieved a high ROIC, exceeding 20% in nine out of the past ten years. ROIC declined in 2022, partly due to the acquisition of CANarchy, which introduced integration costs and margin pressures from the lower-margin alcohol segment. However, ROIC has improved each year since then. While it has yet to return to its previous peak, the upward trend is encouraging. It’s also worth noting that Monster’s ROIC continues to exceed that of most industry peers, reflecting efficient capital allocation. The company has taken steps to address margin pressure, including price increases and supply chain optimizations. Analysts expect these efforts - along with the gradual depletion of higher-cost inventories - to support further improvements in ROIC. Hence, I believe Monster is well-positioned to return to its historically high ROIC levels in the coming years.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Monster has grown its equity in most years, but there was a significant decrease in 2024. There are two main reasons for this. First, the company recorded a $130,7 million write-down, or “impairment charge,” related to its Alcohol Brands segment. This occurred because that part of the business underperformed and fell short of management’s expectations. Future projections were also revised downward, leading the company to lower the value of those assets on its balance sheet. Since equity is calculated as assets minus liabilities, this directly reduced Monster’s equity. Second, the company spent billions of dollars repurchasing its own shares during the year. While buybacks can be beneficial for shareholders by increasing earnings per share and ownership percentage, they also reduce total equity on the balance sheet. Given these two factors, the sharp drop in 2024 doesn’t concern me. There’s a clear explanation for the decline, and the company’s long-term approach to capital allocation still appears sound.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins offer a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. It is not surprising that Monster has consistently generated positive free cash flow for the past 10 years. Free cash flow reached a record high in 2024. This increase was primarily driven by higher operating cash flows resulting from increased sales and improved working capital management - meaning Monster collected payments more efficiently and kept its inventories under control. Despite the record-high free cash flow, the company’s levered free cash flow margin in 2024 was still below the peak levels seen between 2017 and 2020. This lower margin can be explained by several factors: rising input costs, higher operating expenses, and continued investment in new product lines - particularly the Alcohol Brands segment, which currently operates at lower profitability. These factors have made it harder for Monster to convert as much of its revenue into free cash flow as it did at its peak. However, it’s encouraging that the levered free cash flow margin in 2024 was the highest it has been since 2020. As Monster continues to grow its free cash flow, investors benefit through share buybacks. The company doesn’t pay dividends but has reduced its total shares outstanding by about 20% over the past decade. While the free cash flow yield remains low, it is at its highest point since 2019. This suggests that although the stock isn’t cheap, it is trading at its most attractive valuation in several years. We will revisit valuation later in the analysis.

Debt

Another important aspect to investigate is the level of debt - specifically, whether a business has manageable debt that could be paid off within three years. We evaluate this by dividing total long-term debt by earnings. In Monster’s case, this calculation isn’t possible because the company has no debt, which is very encouraging. In fact, Monster has maintained a debt-to-earnings ratio of zero for the past decade. This track record suggests that debt is unlikely to become a concern for the company going forward.

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Risks

Competition is a risk for Monster. Like with all investments, investing in Monster comes with some risks - and competition is a major one. The beverage industry is highly competitive, with demand influenced by shifting consumer preferences, pricing, and disposable income. While Monster has done an impressive job developing products that resonate with its audience, it may be forced to lower prices or increase promotional spending if consumer spending weakens. The company also faces growing pressure from both established rivals and new market entrants. Monster has highlighted the increasing number of competitors in energy drinks, energy shots, and alcoholic beverages. Some of these new entrants include large soft drink companies like Mountain Dew, which now market “functional” energy-style drinks with added ingredients. In addition to long-time rival Red Bull, Monster is now up against fast-growing brands like Celsius, which has gained traction by promoting “clean energy” benefits and securing strong distribution through PepsiCo. Alani Nu is another rising challenger, especially popular among younger female consumers. In this environment, Monster is not only competing for consumer attention but also for limited shelf space at retailers. With many new brands backed by major beverage companies or influencers with large followings, Monster may need to ramp up marketing and trade support to defend its position. Even Monster’s own management has acknowledged that competition has “never been greater.” While Monster and Red Bull still dominate the category, the battle for growth and shelf space is more intense than ever.

Regulation is a risk for Monster. As with any company operating in consumer products, Monster is subject to a wide range of laws and regulations, but the stakes are particularly high in the energy drink and alcohol categories. One of the biggest concerns comes from health-related scrutiny of ingredients like caffeine and sugar, which are central to many of Monster’s products. Public health officials and lawmakers in several countries have raised concerns about the potential health effects of energy drinks - especially among teenagers - due to their high caffeine content. While no major restrictions have been implemented in the U.S., some countries have already banned the sale of energy drinks to minors, imposed caffeine limits, or introduced sugar taxes that impact Monster’s core portfolio. Labeling and packaging requirements are also becoming stricter. In some jurisdictions, products may need warning labels for specific ingredients or be subject to limits on container size. These rules could force Monster to reformulate products or redesign packaging, which could affect brand perception and increase costs. Monster's entry into the alcohol segment through products like The Beast Unleashed adds another layer of complexity. Alcoholic beverages are subject to their own strict set of regulations concerning marketing, labeling, distribution, and age restrictions, both in the U.S. and internationally. A key risk is ensuring clear separation between alcoholic and non-alcoholic product lines - any confusion in branding could lead to regulatory issues or public backlash, especially if underage consumers are inadvertently targeted. Beyond formal regulation, shifting public attitudes toward health and wellness may also pose challenges. As consumers become more health-conscious, lawmakers may respond with stricter policies - such as additional taxes, ingredient restrictions, or advertising limitations - that could affect demand or limit Monster’s flexibility in how it markets its products.

Relying on bottling and distribution partners is a risk for Monster. The company depends heavily on The Coca-Cola Company (TCCC) and its global network of bottlers and distributors to manufacture and deliver its products. While this partnership gives Monster broad international reach and scale, it also reduces Monster’s control over how its products are marketed, promoted, and prioritized. Most of Monster’s distribution rights in the U.S. and abroad are now held by TCCC-affiliated bottlers, meaning the company has less distributor diversification than in the past. If these bottlers shift their focus to other brands in their portfolios - or if disagreements arise - Monster’s products could lose shelf space or visibility. Additionally, many of these bottlers are independent businesses that operate under their own strategies, and not all are directly controlled by TCCC. This can lead to inconsistencies in how Monster’s products are handled across different markets. In some cases, competing brands may even be given more attention or better placement, especially if they come with stronger promotional backing or offer better margins for the distributor. Monster also outsources most of its manufacturing to third-party co-packers, and there are only a limited number of facilities capable of handling the company’s production scale and specialized equipment needs. If any of these partners face disruptions, raise prices, or choose not to renew their agreements, Monster could struggle to maintain product availability - particularly in markets where alternatives are limited or costly. In short, Monster’s reliance on external partners for both production and distribution exposes it to risks outside of its direct control. While the Coca-Cola system provides global scale and efficiency, it also means Monster must continuously invest in strong relationships and ensure its products stay prioritized within a complex and competitive beverage landscape.

Reasons to invest

Global expansion is a reason to invest in Monster. The company has made significant progress in growing its international presence, and this remains a key driver of long-term value. As of 2024, Monster products are sold in over 150 countries, with particularly strong momentum in emerging markets across Europe, the Middle East and Africa (EMEA), Latin America, and Asia-Pacific. Many of these regions still have relatively low per capita energy drink consumption compared to the U.S., leaving plenty of room for further growth. Monster’s global strategy is powered by its long-standing partnership with The Coca-Cola Company. This relationship, established in 2015, gives Monster access to Coca-Cola’s extensive global bottling and distribution network - a massive advantage in terms of logistics, retail reach, and cost efficiency. For many smaller competitors, replicating this kind of infrastructure would be nearly impossible. The Coca-Cola system allows Monster to scale quickly in new markets without needing to build out its own distribution capabilities, keeping incremental costs relatively low. The company is also tailoring its approach to local consumer preferences. For instance, it has developed region-specific flavors and introduced more affordable options like the Predator and Fury brands, designed for price-sensitive markets. Predator, in particular, has shown strong early results in China and India, prompting Monster to launch broader rollouts across those countries. Recent results highlight the strength of Monster’s international strategy. In the fourth quarter of 2024, international net sales made up 39,3% of total revenue, up from 36,8% in the same quarter the year before. Regionally, EMEA sales grew 15,5%, Asia-Pacific saw a 21% increase, and Latin America surged by 38,4%. These growth rates underscore the untapped potential in global markets. Monster has also demonstrated pricing discipline abroad. Management reviews pricing region by region and balances shareholder returns with long-term brand health. Where possible, they are raising prices to improve profitability, but they remain cautious not to lose ground to competitors by overpricing.

Innovation is a reason to invest in Monster. The company’s consistent ability to launch new products across flavors, formats, and categories is a key strength that helps it stay relevant and competitive in the fast-moving beverage industry. Monster doesn’t rely on a single hit product - it operates a portfolio of brands and continually refreshes it with new ideas that reflect evolving consumer preferences. In late 2024 and early 2025, Monster demonstrated a particularly strong focus on innovation, launching a wide range of new drinks across multiple brands. This rapid pace of releases reflects the company’s agile approach to product development and marketing. Management has emphasized that early 2025 innovation has been met with strong retail and consumer demand. Products like Ultra Blue Hawaiian and Juice Viking Berry performed well right out of the gate and continue to expand their distribution. Monster is also taking a more targeted and strategic approach by tailoring offerings to specific consumer segments. For example, the Reign brand remains focused on high-performance energy, while Bang targets lifestyle and gaming audiences. The upcoming launch of Bang Energy Any Means Orange - developed in partnership with the popular content group Any Means Possible - is a clear example of how Monster is blending product innovation with cultural relevance and digital reach. By continuously refreshing its lineup across regions and demographics, Monster stays ahead of trends - whether that means offering sugar-free options, incorporating natural ingredients, or addressing demand for wellness-focused drinks. This approach keeps the brand portfolio vibrant, helps protect shelf space, and reduces reliance on any single SKU or short-lived trend. With strong execution, increasing support from bottling partners, and more launches planned throughout the year, innovation is not just a defensive strategy for Monster - it’s a meaningful growth engine. In a category where relevance can shift quickly, Monster’s steady stream of consumer-focused innovation is a major reason to believe in the company’s long-term potential.

Portfolio diversification is a reason to invest in Monster. While the core Monster Energy line remains the company’s primary revenue driver, Monster has steadily expanded its portfolio into adjacent categories to broaden its consumer base and reduce reliance on a single brand. This approach strengthens its overall brand ecosystem while creating optionality for future growth beyond traditional energy drinks. One area of diversification is performance energy. Through the Reign Total Body Fuel line, Monster has built a strong presence among fitness-conscious consumers, offering high-performance drinks with ingredients like BCAAs and CoQ10. The acquisition of Bang Energy in 2023 added another lifestyle-oriented brand with a loyal following. Early signs suggest Monster is successfully revitalizing Bang and integrating it into its broader portfolio. Monster has also entered the alcoholic beverage market. The launch of The Beast Unleashed - a Monster-branded, 6% ABV malt beverage - marked the company’s first major move into this space. The drink quickly achieved nationwide U.S. distribution, and management has expanded the lineup with new flavors and larger pack sizes. Other launches, such as Nasty Beast Hard Tea and the Miche flavored beer line, reflect a growing alcohol innovation pipeline. Though these non-core ventures are still relatively small in terms of sales, they represent meaningful long-term growth opportunities. With the acquisition of CANarchy, Monster now has exposure to the craft beer and hard seltzer markets, both expected to grow at double-digit rates through 2030. The company is also preparing to roll out select alcoholic products internationally, supported by a restructured brewing division and expanded leadership in sales and operations. By diversifying into performance, lifestyle, and alcohol-based beverages, Monster is increasing its resilience and creating multiple avenues for growth.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 1,49, which is from the year 2024. I have selected a projected future EPS growth rate of 13%. Finbox expects EPS to grow by 12,8% in the next five years. Additionally, I have selected a projected future P/E ratio of 26, which is double the growth rate. This decision is based on Monster's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $32,51. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Monster at a price of $16,25 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 1.929, and capital expenditures were 264. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 185 in our calculations. The tax provision was 480. We have 972,5 outstanding shares. Hence, the calculation will be as follows: (1.929 – 185 + 480) / 972,5 x 10 = $22,87 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With Monster's free cash flow per share at $1,71 and a growth rate of 13%, if you want to recoup your investment in 8 years, the Payback Time price is $24,65.

Conclusion

I believe that Monster is a great company with a strong management team. It has built a moat through brand power, scale, and its global distribution network. The company has consistently achieved a high ROIC over the past decade, and this metric is expected to rise in the coming years. In 2024, Monster delivered record-high free cash flow, and its levered free cash flow margin has also improved in recent years. Competition is a risk for Monster because the beverage industry is becoming increasingly crowded. Established players like Red Bull and fast-growing challengers such as Celsius and Alani Nu are all competing for consumer attention and shelf space. Regulation is another risk, as Monster’s core products - energy drinks and alcoholic beverages - face heightened scrutiny around ingredients like caffeine and sugar, especially when it comes to youth consumption. Relying on bottling and distribution partners also presents a risk. The company depends heavily on The Coca-Cola Company’s global network, which limits Monster’s control over how its products are prioritized, marketed, and distributed. If these partners shift focus or experience disruptions, it could impact shelf space, sales, and overall product availability. Global expansion is a reason to invest in Monster. The company is now present in over 150 countries and is seeing strong momentum in emerging markets, where per capita energy drink consumption remains relatively low. With the support of Coca-Cola’s infrastructure, Monster can scale efficiently and tailor its offerings to local tastes, capturing long-term growth opportunities at a relatively low cost. Innovation is another key strength. Monster regularly refreshes its brand portfolio with new flavors, formats, and targeted offerings that reflect evolving consumer preferences. This steady stream of product launches keeps the company relevant and supports growth across multiple segments. Portfolio diversification is also a compelling reason to invest. Monster has expanded beyond its core energy drinks into performance beverages, lifestyle brands like Bang, and alcoholic offerings such as The Beast Unleashed. This broader portfolio reduces dependence on any single product line and opens up multiple paths for future growth. Overall, I believe there are many things to like about Monster. Buying shares at $37, which would represent a 25% discount to the intrinsic value calculated using the Payback Time price, could be a great long-term investment.

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