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Monster Beverage (MNST) Shows Signs Of Being Water-Logged And Getting Wetter

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Monster Beverage ( MNST) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Monster Beverage as such a stock due to the following factors:

  • MNST has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $84.7 million.
  • MNST has traded 1.2 million shares today.
  • MNST traded in a range 200.5% of the normal price range with a price range of $3.33.
  • MNST traded below its daily resistance level (quality: 111 days, meaning that the stock is crossing a resistance level set by the last 111 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on MNST:

Monster Beverage Corporation, through its subsidiaries, develops, markets, sells, and distributes alternative beverage category beverages in the United States and internationally. It operates in two segments, Direct Store Delivery and Warehouse. MNST has a PE ratio of 36.4. Currently there are 7 analysts that rate Monster Beverage a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Monster Beverage has been 1.5 million shares per day over the past 30 days. Monster Beverage has a market cap of $11.0 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of -0.15 and a short float of 1.8% with 1.92 days to cover. Shares are up 1.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Monster Beverage as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 4.0%. Since the same quarter one year prior, revenues rose by 14.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MNST has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.88, which clearly demonstrates the ability to cover short-term cash needs.
  • MONSTER BEVERAGE CORP has improved earnings per share by 12.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MONSTER BEVERAGE CORP increased its bottom line by earning $1.96 versus $1.86 in the prior year. This year, the market expects an improvement in earnings ($2.48 versus $1.96).
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 40.86% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • The gross profit margin for MONSTER BEVERAGE CORP is rather high; currently it is at 52.41%. Regardless of MNST's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 14.07% trails the industry average.

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