Trade-Ideas LLC identified

Monster Beverage

(

MNST

) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) 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 $136.6 million.
  • MNST has traded 252,050 shares today.
  • MNST is trading at 3.41 times the normal volume for the stock at this time of day.
  • MNST crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on MNST:

TheStreet Recommends

Monster Beverage Corporation, through its subsidiaries, develops, markets, sells, and distributes alternative beverage category beverages in the United States and internationally. MNST has a PE ratio of 52. Currently there are 8 analysts that rate Monster Beverage a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Monster Beverage has been 1.3 million shares per day over the past 30 days. Monster Beverage has a market cap of $28.9 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.43 and a short float of 2.2% with 3.25 days to cover. Shares are up 30.4% 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, expanding profit margins, impressive record of earnings per share growth and compelling growth in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 11.4%. Since the same quarter one year prior, revenues slightly increased by 0.9%. Growth in the company's revenue appears to have helped boost 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 6.97, which clearly demonstrates the ability to cover short-term cash needs.
  • MONSTER BEVERAGE CORP reported significant earnings per share improvement 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 $2.78 versus $1.96 in the prior year. This year, the market expects an improvement in earnings ($3.06 versus $2.78).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Beverages industry. The net income increased by 62.4% when compared to the same quarter one year prior, rising from $141.00 million to $229.00 million.
  • The gross profit margin for MONSTER BEVERAGE CORP is rather high; currently it is at 57.85%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 33.01% significantly outperformed against the industry average.

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