Monster Beverage (MNST) Marked As A Barbarian At The Gate

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.

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 $161.9 million.
  • MNST has traded 74,854 shares today.
  • MNST traded in a range 220.2% of the normal price range with a price range of $4.59.
  • MNST traded above its daily resistance level (quality: 31 days, meaning that the stock is crossing a resistance level set by the last 31 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. It operates in two segments, Direct Store Delivery and Warehouse. MNST has a PE ratio of 57. Currently there are 6 analysts that rate Monster Beverage a buy, no analysts rate it a sell, and 8 rate 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 $21.6 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.16 and a short float of 2.1% with 2.33 days to cover. Shares are up 18.5% 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 hold. 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 and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, premium valuation and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues slightly increased by 9.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in 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 2.47, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to its closing price of one year ago, MNST's share price has jumped by 81.76%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Beverages industry. The net income has significantly decreased by 95.4% when compared to the same quarter one year ago, falling from $95.25 million to $4.41 million.
  • Net operating cash flow has significantly decreased to -$81.76 million or 159.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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