This Monster Has Mastered the Market in 2012

The first half of 2012 is in the rearview mirror, and investors are gearing up for what looks to be an action-packed ending. There are bound to be some big winners -- and more than a few duds -- no matter what happens in the United States and abroad.

Will your favorite stock have its victory lap as we hit the home stretch, or will it get lapped? First-half performances can hold some clues, so let's look to the recent past to find out whether Monster Beverage (NAS: MNST) deserves a place in your portfolio going forward.

First-half recap
Monster has been one of 2012's best performers. Its rise has been steady and virtually uninterrupted from January to the present day, as you can see here:


MNST Total Return Price Chart

MNST Total Return Price data by YCharts

Here are a few financial snapshots of its recent performance:

Market Cap $13.0 billion
Trailing 12-Month Revenue $1.80 billion
TTM Net Income $307 million
TTM Free Cash Flow $310 million
Most Recent Quarterly Revenue $455 million
MRQ Net Income $76 million
MRQ Free Cash Flow $21 million
MRQ Revenue / Net Income YOY Change 27.8% / 38.2%
P/E and Forward P/E 44.4 / 29.2
Price to Free Cash Flow 41.9
Motley Fool CAPS Rating (out of 5) ***

Source: Morningstar.

What the numbers don't tell you
Monster steamed into 2012 as one of the market's most expensive food and beverage stocks. It hasn't looked back, as its current P/E sits about 12 points higher than it did at the start of the year. The company's 2011 annual results puffed more wind into its sails (and cash into its sales), as its new Rehab lineup began eating away at the canned-and-bottled tea segment led by PepsiCo's (NYS: PEP) Brisk and SoBe brands and Dr Pepper Snapple.

Monster seemed to make new 52-week highs with each passing week this year. There weren't many news-based drivers of the company's big momentum, but the news was all gravy. Rumors that Coca-Cola (NYS: KO) might buy Monster never panned out, but that didn't matter, as Monster blasted through analysts' expectations with a strong first quarter.

Those results led to two analyst upgrades in the span of a month, one from UBS upping its price target to $82, the other from Stifel Nicolaus pegging its price target a dollar higher. Monster muscled its way into the S&P 500 in late June, establishing itself as a mid-cap stock with staying power.

Does Monster have nothing but smooth sailing ahead? Not quite. Starbucks (NAS: SBUX) and SodaStream (NAS: SODA) are just two of the many companies trying to make their mark on the energy drink market. Fool contributor Sean Williams even foresees a future in which Obamacare might undermine Monster's sales. The company's high valuation relative to many of its beverage purveyor peers is also a major issue to watch, particularly if its strong sales growth slows.

I outlined Monster's bull case at the end of February. Since then, the stock's gained 26%. Still, I recognize the challenges ahead, and would pay very close attention to any visible slowdown. Many investors have seen huge gains from Monster. If it's time to find your next multibagger, look no further than The Motley Fool's free report on one transformative medical technology stock ready to explode. Claim your free copy of "The Next Rule-Breaking Multibagger" while it's still available.

At the time this article was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.The Motley Fool owns shares of Starbucks, PepsiCo, SodaStream International, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of Coca-Cola, Monster Beverage, Starbucks, SodaStream International, and PepsiCo. Motley Fool newsletter services have recommended writing covered calls on Starbucks and creating a diagonal call position in PepsiCo. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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