Watch Out: Barbarians At The Gate For Monster Beverage (MNST)

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 "barbarian at the gate" (strong stocks crossing above resistance 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 $106.3 million.
  • MNST has traded 889,614 shares today.
  • MNST traded in a range 206.7% of the normal price range with a price range of $3.15.
  • MNST traded above its daily resistance level (quality: 27 days, meaning that the stock is crossing a resistance level set by the last 27 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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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. MNST has a PE ratio of 35.8. Currently there are 6 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 1.4 million shares per day over the past 30 days. Monster Beverage has a market cap of $11.4 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of -0.21 and a short float of 3.1% with 2.93 days to cover. Shares are up 1% year-to-date as of the close of trading on Friday.

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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, good cash flow from operations 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:
  • MNST's revenue growth has slightly outpaced the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 8.9%. 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. To add to this, MNST has a quick ratio of 2.16, which demonstrates the ability of the company to cover short-term liquidity 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 $1.86 versus $1.54 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $1.86).
  • Net operating cash flow has significantly increased by 63.09% to $176.11 million when compared to the same quarter last year. In addition, MONSTER BEVERAGE CORP has also vastly surpassed the industry average cash flow growth rate of -6.53%.
  • The gross profit margin for MONSTER BEVERAGE CORP is rather high; currently it is at 53.11%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.61% trails the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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