Monster Beverage Corporation's (NASDAQ:MNST) Intrinsic Value Is Potentially 34% Above Its Share Price

Simply Wall St.11-16

Key Insights The projected fair value for Monster Beverage is US$69.64 based on 2 Stage Free Cash Flow to Equity Current share price of US$52.00 suggests Monster Beverage is potentially 25% ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMonster Beverage Corporation's (NASDAQ:MNST) Intrinsic Value Is Potentially 34% Above Its Share Price\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-16 22:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/monster-beverage-corporations-nasdaq-mnst-140017641.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n The projected fair value for Monster Beverage is US$69.64 based on 2 Stage Free Cash Flow to Equity \n Current share price of US$52.00 suggests Monster Beverage is potentially 25% ...</p>\n\n<a href=\"https://finance.yahoo.com/news/monster-beverage-corporations-nasdaq-mnst-140017641.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":".IXIC","symbol_name":"NASDAQ Composite","start_time":0,"source_url":"https://finance.yahoo.com/news/monster-beverage-corporations-nasdaq-mnst-140017641.html","article_id":"2483511762","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/idlOfKFL9rJvBRKl6jMEEw--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/75fc45fcae0fdb7335be0900b81256df"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2483511762","pubTimestamp":1731765617,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"The projected fair value for Monster Beverage is US$69.64 based on 2 Stage Free Cash Flow to Equity. Current share price of US$52.00 suggests Monster Beverage is potentially 25% undervalued. Our fair value estimate is 26% higher than Monster Beverage's analyst price target of US$55.24. Does the November share price for Monster Beverage Corporation  reflect what it's really worth?Today, we will estimate the stock's intrinsic value by taking the forecast future cash flows of the company and discounting them back to today's value. Our analysis will employ the Discounted Cash Flow  model. Don't get put off by the jargon, the math behind it is actually quite straightforward.Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. 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Today, we will estimate the stock's intrinsic value by taking the forecast future cash flows of the company and discounting them back to today's value. Our analysis will employ the Discounted Cash Flow (DCF) model. Don't get put off by the jargon, the math behind it is actually quite straightforward. \n Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. \n View our latest analysis for Monster Beverage \n Crunching The Numbers \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: \n 10-year free cash flow (FCF) estimate \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$1.65b\nUS$1.82b\nUS$1.99b\nUS$2.19b\nUS$2.35b\nUS$2.48b\nUS$2.60b\nUS$2.71b\nUS$2.81b\nUS$2.90b\n\n\nGrowth Rate Estimate Source\nAnalyst x7\nAnalyst x6\nAnalyst x1\nAnalyst x1\nEst @ 7.06%\nEst @ 5.73%\nEst @ 4.80%\nEst @ 4.14%\nEst @ 3.69%\nEst @ 3.37%\n\n\n Present Value ($, Millions) Discounted @ 5.9% \nUS$1.6k\nUS$1.6k\nUS$1.7k\nUS$1.7k\nUS$1.8k\nUS$1.8k\nUS$1.7k\nUS$1.7k\nUS$1.7k\nUS$1.6k\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$17b\n The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.6%. We discount the terminal cash flows to today's value at a cost of equity of 5.9%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$2.9b× (1 + 2.6%) ÷ (5.9%– 2.6%) = US$90b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$90b÷ ( 1 + 5.9%)10= US$51b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$68b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of US$52.0, the company appears a touch undervalued at a 25% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. \n\n\n\n  NasdaqGS:MNST Discounted Cash Flow November 16th 2024\n \n\n Important Assumptions \n The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Monster Beverage as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 5.9%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Monster Beverage\n\n\nStrength\n\nDebt is not viewed as a risk.\n\n\nBalance sheet summary for MNST.\n\n\n\nWeakness\n\nEarnings growth over the past year underperformed the Beverage industry.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow for the next 3 years.\n\n\nTrading below our estimate of fair value by more than 20%.\n\n\n\nThreat\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for MNST?\n\n\n\n Looking Ahead: \n Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For Monster Beverage, we've compiled three further items you should consider: \n\nFinancial Health: Does MNST have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.\n Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for MNST's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. \n Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"Business Data","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2483511762"}