Krause Fund Research| Fall 2014
Consumer Staples
Monster Beverage Corporation
NASDAQ: MNST
November 18th, 2014
Recommendation: BUY
Analysts
Caprice Claytor
caprice-claytor@uiowa.edu
Current Price: $110.07
Target Price: $128.24
Mengwei Fan
mengwei-fan@uiowa.edu
Company Overview
MNST: Unleash the Beast!
Monster Beverage Corporation is the nation’s largest
publicly traded energy drink company by annual revenue.
The company develops, markets, sells and distributes energy
drinks and alternative beverages. Monster Beverage
Corporation is segmented into two beverage businesses:
Direct Store Delivery (DSD) and Warehouse, including
energy drinks, juiced based drinks, and soda beverages.
Within these segments, DSD accounts the majority of
Monster’s revenue and is expected to grow 9% in the next
year. Monster Beverage Corporation has a number of
consolidated subsidiaries which conducts manufacturing,
production, and distribution of its products. With anticipated
economic growth and company development, Monster
Beverage Corporation is expected to outperform the overall
market.
Stock Performance Highlights
52 Week High
52 Week Low
Beta Value
Average Daily Volume
109.58
56.66
1.04
1.72M

Monster Beverage Corporation has identified growth
opportunities in revenue and the energy drink industry.
Monster Beverage’s revenue is expected to grow 8% in
the next year and is position in an industry that has
increased 10.8% by annual sales. The company’s
innovative strategies to segue into alternative beverages
will boost expansion within its product segments.

Monster Beverage has a relatively high price to earnings
ratio of 38.90. A high price to earnings ratio is indicates
higher growth in expected earnings. When compared to
its industry leader, Coca Cola Company, Monster
Beverage surpass its competition by 8 points. In the long
term, we expect Monster Beverage to generate higher
earnings and profitability.

The company focuses its endeavors on cultivating brand
awareness and product promotion, also known as the
push-pull strategy. Monster Corporation utilizes this
strategy by directly bringing the products to their
customers through public and sporting events,
motivating customer demand.
This technique
accelerates the demand for Monster’s products, allowing
high growth.

Monster Beverage Corporation has returned 93.0% over
the past year, which has significantly outperformed the
S&P 500 by nearly 80% (13.97%). As the company
maintains strategic innovations and increasing demand,
we anticipate that Monster will continue of outperform
the overall market. Below is a graph of MNST one year
performance compared to the S&P 500.4
Share Highlights
Market Capitalization
Shares Outstanding
Book Value per Share
EPS (2014)
P/E Ratio
Dividend Yield
Dividend Payout Ratio
18.11B
167.64M
8.27
2.50
38.90
N/A
N/A
Company Performance Highlights
ROA
ROE
23.84%
34.13%
One Year Stock Performance vs. S&P 500
Liquidity Ratios
Current Ratio
Cash Ratio
2.60
0.67
Data Retrieved from Yahoo Finance!
1
In the long term, we anticipate that the S&P 500’s value will
grow at a rate of 10%. Although the last 2 years’ average
growth was 23%, 33% and 13% in November 2013 and 2014,
respectively, the dramatic drop in the market last October has
altered our prediction. Taking into consideration that the
S&P 500 dropped nearly 200 points in mid-October, we
anticipate high volatility in the years to come. Therefore,
lowering our estimate to 10%. We believe this growth will be
a result of accurate company valuations, consumer
confidence and market efficiency. We also anticipate that the
economic growth will be a catalyst for the S&P 500’s success.
For the consumer staples sector, we anticipate the companies
will follow the same track as the S&P 500 and have a
relatively high growth value.4
Executive Summary
We recommend Monster Beverage Corporation (NASDAQ:
MNST) as a BUY. Although the U.S. economy has
significantly recovered since the 2008 recession, we
anticipate high volatility and frequent drops in the market,
similar to October 2014. Monster Beverage Corporation
moves non-cyclically with the market and therefore, will
outperform and produce real returns during stable or low
periods, as it has historically. In the past year, Monster has
outperformed the S&P 500 by nearly 80% and has a return of
93%, as of November 17, 2014. Given Monster’s high P/E
ratio and its identified growth, we anticipate that Monster will
continue to significantly outperform the overall market. In
the long term, given the dramatic growth trends and
undeniable returns produced by Monster Beverage
Corporation, its company’s stock is an ideal investment for
the Krause Fund.
Consumer Price Index
The Consumer Price Index (CPI) is a monthly index released
by the U.S. Department of Labor that measures the changes
of prices paid for goods and services by consumers. The
Consumer Price Index essentially evaluates the changes in
consumers’ cost of living and measure the inflation rate
relative to purchasing goods and services. Since the
Consumer Price Index is highly correlated with the overall
economy, variation in the index indicate the health of the
economy. Throughout the last ten years, beginning in
January, the inflation rate has ranged from -2.1% to 5.6%
with 2008 being its highest. The peak in the Consumer Price
Index is the result of the recession and the cost-pull theory.
The cost pull inflation theory is the idea that companies will
increase prices of goods and services to ensure that they will
meet profit margins. However, the index had rebounded and
the rate has stabilized at 1-2%. Following is a chart of the
Consumer Price Index as annualized percentages over the last
10 years.6,7
Economic Outlook
Standard & Poor’s 500
The S&P 500 (Standard & Poor’s 500) is a market valuedweighted index of 500 stocks designed to measure the broad
performance of the economy and the overall return of the US
equity market. The S&P 500 measures the changes of stock
prices in the US equity market and gauges the consumer
confidence level for businesses, consumers and investors.
During the recession, the S&P 500 dropped 729 points from
1,526 to 797, in 2007 and 2009. However, quickly after the
recession, the S&P 500 made a remarkable turn around and
has had a steady increase moving forward. Due to the upward
turn of the market and consumers’ confidence, the S&P500
is now at its highest level of roughly 2000. The chart below
shows the price changes in the S&P 500 over the last 5
years.1,2,4
We also forecast that within the next 2-3 years the Consumer
Price Index will be 2%. Our prediction is based on the
confidence that consumers have in the economy and stability
of our unemployment. Within the consumer staples sector,
purchasers are willing to pay a small increase for products
because of the demand and need for them. However, prices
will stay relatively consistent with the Consumer Price
Index’s movements, therefore steadying with the economy.
On a yearly basis, we anticipate that prices will either climb
by 2% to meet profit margins or companies will drive prices
up for high profit yield. 7,8,9
In the short term, we predict that the S&P 500 will stabilize
at a 2.5% growth rate. After a quick recovery from October’s
sharp drop of roughly 8%, the S&P 500 has grown at nearly
10% in one month. Now that market has recovered, we
believe that investors will stabilize the market with efficiency
and revaluation. Within the consumer staples industries, we
expect these companies to lead the market. Consumer staples
companies are inelastic to stagnant and stable markets.
Therefore, investing in a consumer staples company has a
promising outlook compared to the overall market.
2
expenditures suggests a wealthy society and increased
inflows into the economy. With the increase in disposable
personal income and the demand for products and services,
the consumer staples companies are anticipated to expand.16-
Disposable Personal Income
Disposable Personal Income is a monthly estimated statistic
announced by the Bureau of Economic Analysis that accesses
the amount of income available for spending and saving for a
person after taxes have been paid. The most recent value of
Disposable Personal Income in the United States is $15.7
billion, in September, the highest since 1959. The
Disposables Personal Income has been an upward trend in the
United States, and based on historical values, it is expected to
continue to increase in the future. Many factors influence the
DPI including overall economic conditions, employment rate,
wages, consumer confidence, interest rates and
taxation.13,14,15
21
With the growth in preceding quarters, we expected the real
GDP to stabilize at 3.0% for the short term. Historically, the
Federal Reserve lowers their estimates each quarter until the
final data is in. Analyzing the past two months, the Federal
Reserve has lowered their estimate 1.1%. We anticipated the
final value will be 0.5% less than the third quarter. Even
though there is a decrease quarter to quarter, we believe that
3.0% is a positive signal for consumer staples companies.
In the short term, we estimated that the Disposable Personal
Income will increase on average 2 billion dollars every month
for the next six months. This increase will have a favorable
impact on Consumer Staples. Consumer will become more
confident in the economy’s direction given the recent
rebound and, therefore, significantly increasing the
Disposable Personal Income.
In the long run, we are optimistic and anticipated a growth of
4% in the next 2-3 years. The increase in exports will signal
a strong economy for the United States which is beneficial
for the consumer staples sector. The expansion for goods and
services internationally indicates profitability and growth for
high demand companies. We also believe that higher prices,
a result of demand, will lower the interest rates establishing
significant expansion for the real GDP. Below is a graph of
the Real Gross Domestic Product as annualized percentage of
change over the last ten years.20
In the long run, we are less optimistic and expect the
Disposable Personal Income will continue to grow, but at a
slower pace than the last couple of years, as shown in the
chart below. 13,14
Data Retrieved from FRED
We anticipate the DPI will only grow to $17 billion in the
next 2-3years. With the decrease in growth of Disposable
Personal Income, we expect consumer staples companies to
establish new strategies to maintain profit margins. Although
we forecast growth to decrease, we expect demand to be
consistent and benefit the consumer staples companies
moving forward.15
Capital Markets Outlook
The consumer staples sector mostly consist of non-cyclical
industries, therefore, as the United States equity market
experiences dramatic drops as it did last October, investors
are going to want to seek stable companies that produce high
demand products. The consumer staples sector is resistant to
stagnation and a down turning market, consequently, making
our industry’s prospects a positive investment no matter what
direction the market is going. Given the expected growth in
Disposable Personal Income and real GDP, we are confident
that the increase in demand and the expansion of the economy
will be beneficial for the consumer staples sector. Over the
past year, the Consumer Staples Select SPDR ETF has
performed relatively close to the S&P 500 with only a 3 point
difference. Given that the S&P 500 is expected to grow 10+%
in the next 2-3 years, an investor can expected the same return
from a consumers staples company. Shown following in the
chart is price changes of the consumer staples sector and the
S&P 500 in the past year.4
Real Gross Domestic Product
The Real Gross Domestic Product (Real GDP) is a
comprehensive statistic of all goods and services produced in
the United States. The Real GDP is quarterly released by the
Bureau of Economic Analysis indicating the economic health
and measuring profitability growth and expected returns on
the capital market. In the third quarter of 2014, the Real GDP
increased at an annual rate of 3.5%. In the second quarter, the
Real GDP increased 4.6%. The 2014 increase is primarily a
result from governmental spending, fixed investments,
exports and positive contributions from personal
consumption expenditures. The improvement in Real GDP is
a positive indicator for the growth of the consumer staples
sector. The positive flows from personal consumptions
3
The consumer staples industry group moves consistently with
the market and in the last six months has barely
underperformed the S&P 500. Compared to the competing
industry groups, the consumer staples has ranked the fifth
highest with a return of 7.57%. Below is a chart showing how
the consumer staples industry group’s returns compare to the
S&P 500 and other sectors.32
Data Retrieved from Yahoo Finance!
Notice that during the latest drop, the Consumer Staples
Select SPDR ETF dropped fewer points than the S&P 500,
which was most likely carried by high demand companies
such as: the beverage, food, and tobacco industries. As the
economy recovers, we believe that the market will experience
frequent drops allowing in the consumer staples sector to
slightly outperform the market in the long run.
Industry Analysis
Industry Overview
The consumer staples sector is segmented into the following
industry groups:
 Food & Staples Retailing
o Drug Retail, Food Distributors, Food
Retail, Hypermarkets & Super Centers
 Food, Beverages & Tobacco
o Brewers, Distillers & Vintners, Soft
Drinks, Agricultural Products, Packaged
Foods & Meats, Tobacco
 Household & Personal Products32
Sector industries’ return over six months. Data retrieved
from Select Sector SPDR
Sub-Industry
The beverage industry is segmented into three sub-industries
that is comprised of alcoholic and non-alcoholic beverages:
Brewers, Distillers and Vintner, and Soft Drinks. These subindustries consist of wines, beers, spirits, energy drinks,
sodas, and non-carbonated beverages. In the beverage
industry, the soft drink sub-industry is leading with
approximately 62% of the industry’s revenue in 2014.
Specifically, energy drinks make up $6.8 Billion of its
revenue and leads in growth with 10.8%. In the United States,
Monster Beverage Corporation accounts for one-third of the
energy drink revenue itself, making it the nation’s leading
energy drink producer.22,25,31
Below is a pie chart of the estimate weight of each industry
group in the S&P 500. The consumer staples is ranked the
sixth highest with 10% of the S&P 500 index.32
Consumer
Discretionary
Consumer
Staples
Energy
3%
12%
22%
3%
10%
9%
11%
14%
16%
Profitability
Financials
$1,500,000,000
Healthcare
$1,000,000,000
$500,000,000
Industrials
$0
Materials
Technology
In Dollars
Utilities
Profitability by sub-industry categories. Data retrieved from IBISWorld
Sector industries’ estimated weight in the S&P 500. Data
retrieved from Select Sector SPDR
As demonstrated in the chart above, the soft drink subindustry hold the majority of the beverage industry’s
4
profitability with energy drinks in the top three controlling
$787.2M. Given its high growth and profitability, we expect
energy drink producing companies to propel and actively
expand in market capitalization.22-32
Company Segmentation for the
Soda Sub-Industry
Coca Cola Co
Recent Development and Industry Trends
The most recent trends and developments, encourage a
positive outlook for the consumer staples industry group.
Although there is heavy momentum toward healthier
beverages, the increase for demand signals growth of this
industry. The expansion in grocery and discount retail store
products signal an increase in average price per volume,
therefore, allowing visible improvements in profitability. The
strengthening dollar has increased competition between
foreign manufacturers such as Red Bull and has advocated
growth and demand in emerging markets. The developing
concerns for healthier and more environmental safe products
has drove producers to use more ecological bottles and cans,
along with reducing the artificial flavors and additives in
products. We anticipate that the product innovations and
increased demand, will expand the consumer staples group
by 4% in the next 5 years.31
Pepsi Co
29%
41%
Dr Pepper
Snapple Group
10%
Other
20%
Data Retrieved For IBISWorld
In the chart below shows the leading firms within the
beverage industry compared to Monster Beverage
Corporation by financial ratios and comparative values.23
Market and Competition
The soft drink sub-industry is highly concentrated with about
50 of its top companies contributing to 95% of its revenue.
The demand is driven by young demographics, its taste, and
the post consumption benefits. This contributes to new
players to entering the industry. As new players enter the
market, competitive innovation will promote fast growing
niche products. However, customer loyalty will protect the
leading companies’ revenues and eliminate new entrees.
Despite the declining revenue and growth of soda products,
the acceleration in energy drink revenues has kept these
companies in the green. To maintain profit margins, soda
companies will need to adopted new strategies to innovate
energy drink products into their product lines.23
Company
Coca-Cola
Pepsi Co
Dr. Pepper
Snapple
Monster
Beverage
Market
Cap
(M USD)
181,840.4
0
136,921.9
4
12,074.39
EPS
P/E
Ratio
Cash
Div.
2.0539
20.1857
4.4148
20.5830
3.4447
17.9636
15,027.48
2.4119
37.2698
0.305
0
0.655
0
0.410
0
-
Data Retrieved from Bloomberg

Industry Leaders
The industry’s three major players are Coca Cola Company,
PepsiCo Inc. and Dr. Pepper Snapple Group Inc. Their
market caps are 187.99B, 147.30B and 13.75B respectively.
Coca Cola Company, PepsiCo Inc. and Dr. Pepper Snapple
Group Inc. are the major players of soda, and juice and bottle
water productions. Coca Cola Company makes up 28.8%,
32.8% and 5.6% of the soda, juice and water bottle industries,
respectively. PepsiCo Inc. holds 20.3%, 36.6% and 9.9% of
the soda, juice and water bottle industries. Dr. Pepper
Snapple Group controls 10.0% and 8.8% of the soda and juice
industries, respectively. Below is a chart showing that the
major soda companies make up 59% of the soda sub-industry,
the largest sub industry.23



5
Market Capitalization: Coca Cola and Pepsi’s companies
are relatively larger than Monster Beverage. However,
all of the companies are considered a large stock
company by qualified size. Coca Cola and Pepsi’s size
can be explained by their long years of growth and
development compared to Monster’s shorter life cycle.
Monster Beverage’s size ranks third, above Dr. Pepper
and Snapple Group, which is appropriate for its expected
growth and profitability.
EPS: Earnings per Share (EPS) generally serves as an
indicator for company’s profitability. EPS is a major
component in determining a company’s stock price.
Relatively high EPS is a good indication of the
company’s continuing values. Overall, all the four
companies seem to be in a great position.
P/E Ratio: A high Price to Earnings Ratio suggest higher
expected earnings in the future. Compared to the
industry leaders, Monster Beverage has the highest P/E
ratio by over 7 points. We anticipate that Monster with
generate higher earnings in the short to long term.
Cash Dividend: Cash dividends are annually or quarterly
dividends to stockholders. Monster Beverage does not
pay dividends to its stockholders which makes its value
0. As an investor, we would consider Monster’s
reinvestments as a positive outlook. The reinvestments
enable Monster to maximize gains and increase its
intrinsic value.23
N/A
2246
2061
1703
1304
Year
Data retrieved from: Net Advantage (Standard and Poor’s)
Corporate Strategy
Monster Beverage Corporation mainly focuses on developing
and marketing new products and expanding its international
business. In recent years, the company has been particularly
aiming at developing healthier drinks that have fewer calories
to meet the demand from consumers who are concerned about
health. For 2013, nine different innovative products were
introduced. Selling its products in 114 countries, the
company also plans to introduce its products in additional
countries to increase sales outside of the United States. The
graph below shows the amount of gross sales to customers
outside of the United States and its percentage of total sales
have been increasing.
The chart below compared the stock prices of leading firms
within the beverage industry compared to Monster Beverage
Corporation. Currently, Monster
Data retrieved from IBISWorld
Beverage Corporation is providing a higher return than its
leading competitors. We can expect this for the long term
considering Monster’s reinvestment policy and high P/E ratio.
2013
2012
2011
Gross Sales to customers
outside of United States (in
Million $)
580.6
513.9
381.0
Percentage of total sales
23%
22%
20%
Life Cycle
Monster Beverage Corporation is currently in the growth
stage. According to Jeffrey Hooke of Security Analysis and
Business Valuation on Wall Street, the performance of a
corporation in the growth stage should have a “steady growth
in sales as product acceptance widens.” The Financial
Summary shows that the revenue of Monster Beverage
Corporation has been constantly growing. As a matter of fact,
2013 is Monster’s 21st consecutive record year of increasing
gross revenue. As the company develops and markets more
innovative products, the long term trend will remain and will
reach a steady state.33,34
Key Investment Positives and Negatives
Overall, the beverage industry is anticipated to be a growth
industry. Since Americans are choosing a healthier lifestyle
and with government campaigns promoting healthier habits,
the demand and revenue for both regular and diet soft drinks
will decline. This decline will be counteracted by the growth
in energy drink products and new innovations and therefore,
maintaining profit margins within the industry.22,23,24
Financial Summary
Monster Financial Summary (Million $)
2013
2012
2011
2010
2009
2,246 2,061 1,703 1304
1143
Revenue
340
286
212
209
Net Earnings 339
1,420 1,043 1,362 1082
800
Total Asset
1.95
1.86
1.53
1.14
1.11
EPS
Data retrieved from: Net Advantage (Standard and Poor’s) 35
Company Analysis
Company Overview
Beginning in 1930s, Monster Beverage Corporation was
known as Hansen’s Juices, Inc. and changed its name to
Monster Beverage Corporation on January 5, 2012.
Headquartered in Corona, California, Monster is a holding
company and conducts no operating business except through
its consolidated subsidiaries. It is the nation’s largest publicly
traded energy drink company by annual revenue and offers
products including energy drinks and juice based and soda
beverages. The company has two segments, DSD Segment
and Warehouse Segment. The majority of its revenue is
derived from product sales in its DSD Segment which is
primarily energy drinks products.33
2014
2013
2012
2011
2010
536.1
484.2
454.6
356.4
238.1
1Q
687.2
630.9
592.6
462.1
365.7
2Q
636.0
590.4
541.9
474.7
381.5
3Q
N/A
540.8
471.5
410.9
318.7
4Q
Products and Segments
Monster Beverage Corporation has two different segments,
Direct Store Delivery Segment that includes energy drinks,
and the Warehouse Segment, that includes juice-based and
soda beverages.
DSD Segment
The energy drinks are developed, marketed, and sold under
multiple brand names, including Monster Energy®, Monster
Rehab®, and etc. The sales from Monster Energy® brand
energy drinks accounted for 92.5%, 92.3% and 91.2% of the
total sales for year 2013, 2012, and 2011, respectively. The
DSD segment operates primarily through a special distributor
network.33
6
Warehouse Segment
The Warehouse Segment sells the products directly to
retailers. The products include Huber’s® lemonade, a ready
to drink lemonade product that contains no preservatives and
artificial flavors. Along with others, the corporation produces
Hansen’s® soda, a leading natural soda product on the West
Coast of United States for the last 30 years.33
identification and
competitors.33
The pie chart below shows the percentage of sales from the
DSD Segment and the Warehouse Segment.33
96%
Direct Store Dilevery
their
products
from
Manufacture and Distribution
Instead of directly manufacturing its product, Monster
Beverage Corporation outsources the manufacturing to a
third party bottlers and co-packers throughout the United
States and abroad. Monster is generally responsible for the
purchases and deliveries to its third party bottlers and copackers. The company purchases ingredients, such as
concentrates, sweeteners, juices, and cans, from US and
foreign suppliers and delivers the ingredients to its third party
partners. Generally, all raw materials are purchased from
single manufacturers. Independent suppliers hold the largest
portion of the expenses for product development, which
allows Monster Corporation to develop new products and
flavors. Monster Beverage Corporation packages its products
both domestically and internationally, enabling them to
produce its products closer to the selling markets and to
reduce freight and transportation costs. Monster Energy®
Drinks are sold in roughly 114 countries and territories and
account for $580.5 million gross sales outside the United
States for the year ending December 31, 2013.33
Other Products
Monster Beverage Corporation also plans on introducing
additional flavors and developing new product lines.
4%
distinguish
Warehouse
Significant Customers
Monster Beverage Corporation’s primary customers are
beverage distributors, retail grocery chains, drug and
specialty chains, wholesalers, mass merchandisers,
convenience stores, health food distributors and the military.
For 2013 and 2012, Coca-Cola Refreshment USA, Inc.
(“CCR”) accounted for nearly 29% and 28% of Monster’s
total sales. The chart below shows the percentages of sales
from the company’s primary customers. As we can see that
full service distributors were the major buyers from 2011 to
2013.33
2013 2012 2011
63% 63% 64%
Full service distributors
9%
10%
Club stores, drug chains & mass 9%
merchandisers
23% 22% 20%
Outside the U.S.
3%
4%
4%
Retail grocery, specialty chains
and wholesalers
2%
2%
2%
Other
Competition
The beverage industry is highly competitive. Monster Energy
Corporation’s major competitors in the energy drink industry
are Red Bull, Rockstar Energy and NOS Energy Drink. The
areas of competition include pricing, packaging, flavor, and
development of new products as well as promotional and
marketing strategies. Major competitors in the beverage
industry include PepsiCo, Inc., The Dr. Pepper Snapple
Group, Inc. Although some of the competitors are better
positioned in the beverage industry, Monster’s low property
plant and equipment capital structure provides Monster a
competitive advantage. As shown in the chart below,
compared to Coca-Cola Co, Pepsi Co, and Dr. Pepper
Snapple, Monster has the highest Price to Earnings ratio
which gives it a positive potential outlook.22,23,33
P/E Ratio
40
30
20
Marketing Strategy
Monster Beverage Corporation’s marketing strategy focuses
on their endeavors on cultivating brand awareness and
product promotion. Monster Corporation utilizes a push-pull
strategy which enhances demand for their products with
promotions and advertising. Monster Corporation pushes its
brands with competitions, endorsements from selected public
and sporting figures, sampling, sponsorship, advertisements
and coupons. It also pulls the consumers’ demand by directly
bringing the products to their customers through public and
sporting events. Monster Corporation believes the key to
successful marketing is differentiation. It fulfills this strategy
by frequently redesigning their packaging to maximize their
10
0
Coca-Cola Co
Pepsi Co
Dr. Pepper
Snapple
Monster
Beverage
P/E Ratio
Governmental Regulations
Monster Beverage Corporation and their products are subject
to numerous U.S. federal, state and international regulations
applicable to the production, transportation, sale, safety,
advertising, labeling and ingredients of such products.
Regulations and health officials impose a threat and
adversely affect the company, finances and operations. These
7
factors such as regulation and litigation will cause a high
volatility level of the stock price.33
issues caused by energy drinks. Although the Food and Drug
Administration does not have any regulation subjects to
energy drink industry, health experts are pushing the
government to establish regulations that can limit the amount
of caffeine in Energy Drinks. Also, the growing concerns
about obesity problems may shift consumers’ preferences to
healthier products such as bottle water, vitamin water, and
natural juice.33
Partnership: Coca-Cola Company
In August 2014, the Coca-Cola Company, one of major
players in the beverage industry, acquired nearly 16.7 percent
ownership in Monster and is willing to transfer its energy
drink business to Monster. In return, Monster agreed to
transfer its soda and juice based business to the Coca-Cola
Company. We believe this agreement will help Monster
expand business in both domestic and international markets,
as it allows Monster to have access to networks that CocaCola has worldwide.36
Regulation
There will be an increase in regulations in response to the
concerns over health, obesity, and caffeine consumption.
Enforced regulations and public concerns represent a risk to
the success and stability of Monster Beverages Corporation.
The food and drug regulations in countries outside of the
United States can also limit the revenue of Monster’s
products.39
Catalysts for Growth
In 2013, gross sales outside of United States was $580.6
million. We anticipate that the number will grow in the next
five years, because the demand in emerging market in
countries such as China will help Monster spread their
product to additional countries outside of United States.
Consumer’s concerns about health and wellness will shift the
demand of carbonated soda drinks, such as Coca Cola and
Pepsi, to demand of healthier alternative beverages. As
Monster developing more and more innovative products, it
will attract more consumers.33
Valuation Discussion
Valuation overview
We used three different valuation techniques to evaluate the
target stock price of Monster Beverage Corporation. The
techniques include Discounted Cash Flow Model, Economic
Profit Model, and Fundamental Price to Earning model. By
using the DCF and EP models, we reached the intrinsic value
of $128.24, which is 16.51% higher than its current stock
price. The Fundamental Price to Earning model provides us
an intrinsic value of $93.07. The discrepancy between these
two results is due to the fact that Monster does not pay any
dividend to its shareholders, which undermines the credibility
of the intrinsic value provided by the DDM model. Thus, we
believe the intrinsic value of 128.24 is more accurate.
Key Investment Positives
Efficient Capital Structure
Monster’s strategy of outsourcing the manufacturing to third
party bottlers and co-packers provides it with competitive
advantages of lower labor, operating and overhead costs,
enabling it to have more money to develop new products.
Outsourcing also allows Monster to keep their property plant
and equipment at a low level, which can help it reduce
expenses such as depreciation and plant maintenance costs.37
Revenue Decomposition
Based on economic indicators, industry information, and
historical information, we forecast the potential growth rate
of the revenue generated by four different product lines. We
estimate Monster’s total net sales to grow at an average rate
of 8.03% from 2014 to 2019. We expect the continuing value
of the company to be 5.55%.
Fast Expansion
Monster Beverage Corporation believes that international
growth is one of the key value drivers. We also believe that
the rises of emerging markets will provide Monster great
opportunities to expand spread its business and to generate
value. The BRIC countries, Brazil, Russia, India, and China,
account for more than 25 percent of global GDP. The
increasing demand in these countries provides Monster a
promising future.38
Energy Drinks
Revenue generated by Monster’s Energy Drinks accounts for
approximately 93% of its total revenue. We anticipate the
pattern to remain in the next five years. We are very
optimistic about the revenue generated by the energy drinks
because we believe that the long term strategic partnership
with Coca Cola is a good opportunity for Monster to boost its
sales. We have forecasted the revenue to grow at 5.55% at a
steady state in five years.
Key Investment Negatives
Public Concerns
Studies found that energy drinks with a high level of caffeine
can cause serious health problems in young children. There
is also an increasing trend of people become aware of their
health. Such study may create public concerns over health
Non-Carbonated Drinks
Monster has been investing in developing healthier
“alternative” drinks that have no artificial flavors, caffeine,
or preservatives to meet the increasing demand of its
8
customers. These healthy products will make up a large
portion of the Non-Carbonated Drinks. We believe these new
products will increasingly generate revenue for Monster in
next five years because consumers are more aware of their
health and obesity problems.
Company, Pepsi Co, and Dr. Pepper Snapple Group as
Monster’s major competitors. We averaged out the estimated
Price to Earnings ratios of these company, which are
calculated by using the stock price as of November 18, 2014
divided by the earnings of each company. Multiplying this
industry average by the forecasted Earnings per Share of
2014 and 2015, we produced $52.35 and $53.90 respectively.
The intrinsic value we produced by using the Relative P/E
Valuation Model is lower than Monster’s current stock price,
$110.07. We do not think this value accurately represents the
intrinsic value of Monster.
Carbonated Drinks
Over the last four years, the revenue from Carbonated has
been growing negatively because of the decreased sales by
volume of Hansen’s ® soda. Also, transferring soda and juice
business to Coca-Cola will affect the revenue from
carbonated drinks in the long run. We have forecasted the
revenue to grow at 3.0% in 2014.
Weighted Average Cost of Capital
For Weighted Average Cost of Capital, we reached an
estimate of 7.88%.
Other Products
Monster has been focusing on introducing other innovative
products such as energy shots. Although the revenue from
other products only makes up a very small portion, it will help
Monster grow because innovative products can easily attract
consumer’s attention.
Cost of equity
We applied Capital Asset Pricing Model to calculate
Monster’s Cost of equity. The Risk premium that we used is
4.64% which is the US historical geometric average premium.
We used yield of 30 year US Treasury Bond as our risk free
rate. The CAPM model gives us the cost of equity of 7.89%.
The graph below shows the percentage of total revenue by
product line
Energy drinks
Cost of Debt
Monster does not have any publicly traded bond. We used its
major competitor, the Coca-Cola Company’s 2.98% pretax
cost of debt, as Monster’s pretax cost of debt.
Non-Carbonated
Cost of preferred Stock
Monster does not have any preferred stock.
Renenue
1% 1%
5%
Capital Structure
Monster does not have any short term or long debt. All of its
$1.3 million debt at December 31, 2013 came from capital
leases and collateralized by vehicles. The low debt capital
structure gives Monster lower debt ratio and debt to equity
ratio, compared to its competitors.
Carbonated
93%
Other
Sensitivity Analysis
We built a Sensitivity Analysis to evaluate how the intrinsic
value changes as key assumptions change.
Discounted Cash Flow and Economic Profit Model
The Discounted Cash Flow model and the Economic Profit
Model produced the same results of $128.24per share, 16.51%
higher than the current stock price of $110.07 as of November
18th 2014. We reached a conclusion of buy based on these
results.
Risk-Free-Rate:
The Risk-Free-Rate of 3.07% that we used in our models is
the yield of 30 year US Treasury Bond. This risk free rate
produced the intrinsic value of $128.24 per share. As the
sensitivity table shows, the intrinsic value decreases
dramatically as the Risk-Free-Rate increases. A risk free rate
of 2.67% will produce a price of $153.58 per share, which is
39.53% higher than Monster’s current price.
Dividend Discount Model
By using the Dividend Discount Model, which is also known
as the Fundamental Price to Earning model, we got an
intrinsic target price of $93.07. This price is lower than the
one provided by the DCF and EP model because Monster
does not pay any dividend to its shareholders. Therefore, we
did not consider this intrinsic value to reach an investment
recommendation.
Beta
The Beta that we used to calculate the Weighted Average
Cost of Capital is a weekly data retrieved from the
Bloomberg. The intrinsic value is also very sensitive to the
Beta. A 3 percent increase of Beta can cause 7 percent
decrease of in price.
Relative P/E Valuation Model
In order to evaluate Monster’s performance relative to other
companies within the beverage industry, we conducted a
Relative P/E Valuation Model. We choose Coca Cola
Equity Risk Premium
9
The Equity Risk Premium will also influence Monster’s stock
price because equity makes up the majority of the capital
structure. There is a positive correlation between the Risk
Premium and the intrinsic value. If the Risk Premium
increase to 4.68%, the price would decrease to $126.12 per
share. The sensitivity table shows that, compared to Beta and
risk free rate, stock price is less sensitive to Equity Risk
Premium
CV Growth Rate
The intrinsic value increases as the CV growth rate increases.
The CV growth rate that we are using is 5.55%, but when it
increases to 5.95%, the intrinsic value will be driven to
$150.47 per share. When it decreases to 5.15%, the stock
price will decrease to $112.55 per share. Factors such as
capital expenditures, depreciation costs, and research can
affect the CV Growth Rate.
Important Disclaimer
This report was created by students enrolled in the Security
Analysis (6F:112) class at the University of Iowa. The report
10
11
was originally created to offer an internal investment
recommendation for the University of Iowa Krause Fund and
its advisory board. The report also provides potential
employers and other interested parties an example of the
students’ skills, knowledge and abilities. Members of the
Krause Fund are not registered investment advisors, brokers
or officially licensed financial professionals. The investment
advice contained in this report does not represent an offer or
solicitation to buy or sell any of the securities mentioned.
Unless otherwise noted, facts and figures included in this
report are from publicly available sources. This report is not
a complete compilation of data, and its accuracy is not
guaranteed. From time to time, the University of Iowa, its
faculty, staff, students, or the Krause Fund may hold a
financial interest in the companies mentioned in this report.
Yahoo Finance, Retrieved from:
http://finance.yahoo.com/news/consumer-staples-stockoutlook-june-220001757.html
12
K-Swiss. (2009). Annual report 2009. Retrieved from:
http://www.wikinvest.com/stock/KSwiss_(KSWS)/Filing/10-K/2009/F5210191
13
United States Disposable Personal Income. (1959-2014
Trading Economics. Retrieved from:
http://www.tradingeconomics.com/united-states/disposablepersonal-income
14
Disposable Income. InvestWords. Retrieved from:
http://www.investorwords.com/1491/disposable_income.ht
ml#ixzz3CJfmWQE2
15
Bureau of Economic Analysis. (2014) Retrieved from:
http://www.bea.gov/newsreleases/national/pi/pinewsrelease.
htm
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Overview of 10 Economic Reports and Indicators You Need
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http://www.aimr.org/pressroom/fjnews.html
16
http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.Z
G
17
Bloomberg Economic Statistics U.S. GDP
18
http://bea.gov/newsreleases/national/gdp/gdpnewsrelease.
htm
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http://www.forbes.com/sites/samanthasharf/2014/08/28/us-gdp-grew-4-2-in-the-second-quarter-2013-up-from-firstestimate/
2
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4
Yahoo Finance! 2014
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5
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22
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6
U.S. Bureau of Labor Statistics. (2014, September 4).
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pct_1mth.
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from: http://valuationacademy.com/porters-five-forces-inaction-sample-analysis-of-coca-cola/
23
7
Economics Online. (2014, September 5). Stable Prices.
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http://www.economicsonline.co.uk/Managing_the_economy
/Stable_prices.html
24
IBISWorld. (2014, September). Energy Drink Production
in the US. Retrieved from: IBIS Industry Market Research
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8
Bloomberg L.P. (2014, September 5). Description of
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25
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Overview of 10 Economic Reports and Indicators You Need
to Know. Retrieved from:
http://www.aimr.org/pressroom/fjnews.html
26
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US. Retrieved from: IBIS Industry Market Research
database.
10
Zacks Equity Research.(June 21, 2013). Consumer Staples
Stock Outlook.
27
IBISWorld. (2014, September). Beer, Wine & Liquor
Stores in the US. Retrieved from: IBIS Industry Market
Research database.
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IBISWorld. (2014, September). Bottled Water Production
in the US. Retrieved from: IBIS Industry Market Research
database.
29
IBISWorld. (2014, September). Tea Production in the US.
Retrieved from: IBIS Industry Market Research database.
30
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ook.aspx?entid=42
32
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http://www.sectorspdr.com/sectorspdr/
33
Monster Beverage Corporation. (2014, September 21).
Monster Beverage Corporation 2013 Annual Report.
Retrieved from:
http://files.shareholder.com/downloads/HANS/3494687229
x0x746046/8bb1c204-a666-4a75-a933178abd4742d9/Monster_Beverage_2013_Annual_Report.pd
f
34
Hooke J. C. (2010). Security Analysis and Business
Valuation on Wall Street (2nd Edition). Wiley.
35
Data retrieved from: Net Advantage (Standard and
Poor’s)
36
Study finds energy drinks can lead to serious health issues
in young children. (2014) Retrieved from:
http://www.kshb.com/decodedc/study-finds-energy-drinkscan-lead-to-serious-health-issues-in-young-children
37
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BRIC Countries – Background, Latest News, Statistics and
Original Articles. (2014) Retrieved from:
http://www.globalsherpa.org/bric-countries-brics
39
Bowman. L. (Nov 17th 2014) Study finds energy drinks can
lead to serious health issues in young children.
Retrieved from:
http://www.kshb.com/decodedc/study-finds-energy-drinkscan-lead-to-serious-health-issues-in-young-children
38
12
MONSTER BEVERAGE CORPORATION
Revenue Decomposition
(Million $)
Fiscal Years Ending Dec. 31
Segments
Direct Store Delivery
Growth
Warehouse
Growth
Total Net Sales
Change in Total Net Sales
Product Lines
Energy drinks
Growth
Non-Carbonated
Growth
Carbonated
Growth
Other
Growth
Total Net Sales
Change in Total Net Sales
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
2019CV
1608.33
32.63%
94.90
3.95%
1703.23
30.62%
1966.48
22.27%
94.22
-0.72%
2060.70
20.99%
2147.36
9.20%
99.07
5.15%
2246.43
9.01%
2399.03
11.72%
89.32
6.00%
2309.70
11.00%
2650.92
10.50%
70.11
5.00%
2721.03
17.81%
2908.06
9.70%
41.43
5.00%
2949.50
8.40%
3108.72
6.90%
59.34
5.00%
3168.05
7.41%
3264.15
5.00%
116.29
5.00%
3380.44
6.70%
3394.72
4.00%
173.21
5.00%
3567.93
5.55%
1563.33
32.70%
94.40
17.21%
32.47
-1.33%
13.03
4.88%
1703.23
30.62%
1906.24
21.93%
110.22
16.76%
31.04
-4.38%
13.21
1.31%
2060.70
20.99%
2082.24
9.23%
120.15
9.01%
29.25
-5.80%
14.80
12.08%
2246.43
9.01%
2311.28
11.00%
130.96
9.00%
30.12
3.00%
15.98
8.00%
2488.35
10.77%
2530.86
9.50%
141.43
8.00%
31.48
4.50%
17.26
8.00%
2721.03
9.35%
2745.98
8.50%
151.34
7.00%
33.37
6.00%
18.82
9.00%
2949.50
8.40%
2951.93
7.50%
160.42
6.00%
35.20
5.50%
20.51
9.00%
3168.05
7.41%
3152.66
6.80%
168.44
5.00%
36.79
4.50%
22.56
10.00%
3380.44
6.70%
3329.21
5.60%
176.02
4.50%
37.89
3.00%
24.82
10.00%
3567.93
5.55%
13
MONSTER BEVERAGE CORPORATION
Income Statement
(Million $)
Fiscal Years Ending Dec. 31
Sales
COGS excluding D&A
Depreciation
Amortization of Intangibles
Gross Income
SG&A Expense
EBIT (Operating Income)
Non-operating Income - Net
Non-operating Interest Income
Other Income (Expense)
Interest Expense
Unusual Expense - Net
Pretax Income
Income Taxes
Consolidated Net Income
Net Income
EPS
Total Shares Outstanding
2011
2012
2013
2014E
1,703.23 2,060.70 2,246.43 2,488.35
791.84
974.48 1,050.74 1,149.82
17.03
20.51
22.71
28.96
0.05
0.05
0.05
0.09
894.31 1,065.66 1,172.93 1,309.48
437.89
515.03
589.22
606.59
456.42
550.62
583.72
702.88
1.62
(0.37)
(8.18)
3.11
1.67
1.40
1.00
1.20
(0.05)
(1.77)
(9.18)
1.92
0.05
--0.00
0.73
1.10
11.64
0.00
457.27
549.15
563.89
709.11
171.05
209.13
225.23
279.46
286.22
340.02
338.66
429.65
286.22
340.02
338.66
429.65
1.54
1.86
2.00
2.60
174.28
165.78
166.82
165.03
14
2015E
2,721.03
1,257.34
33.19
0.09
1,430.40
663.31
767.09
3.40
1.33
2.08
0.00
0.00
773.90
313.20
460.70
460.70
2.82
163.37
2016E
2,949.50
1,362.91
36.27
0.09
1,550.22
719.01
831.22
3.69
1.47
2.22
0.00
0.00
838.59
339.38
499.22
499.22
3.08
161.83
2017E
3,168.05
1,463.91
38.10
0.09
1,665.96
772.28
893.67
3.96
1.64
2.33
0.00
0.00
901.60
364.88
536.72
536.72
3.35
160.40
2018E
3,380.44
1,562.05
39.33
0.09
1,778.97
824.06
954.91
4.23
1.82
2.41
0.00
0.00
963.37
389.88
573.49
573.49
3.61
159.08
2019CV
3,567.93
1,648.68
40.16
0.09
1,879.00
869.76
1,009.23
4.46
2.01
2.45
0.00
0.00
1,018.16
412.05
606.11
606.11
3.84
157.85
MONSTER BEVERAGE CORPORATION
Balance Sheet
(Million $)
Fiscal Years Ending Dec. 31
Assets
Current Assets
Cash
Short Term Investments
Accounts Receivables, Net
Inventories
Other Current Assets
Total Current Assets
Net Property, Plant & Equipment
Property, Plant & Equipment - Gross
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
2019CV
359.33
411.28
218.74
155.61
37.71
1,182.68
45.15
82.11
222.51
97.04
236.71
203.11
75.70
835.07
69.14
116.35
211.35
402.25
296.18
221.45
51.82
1,183.04
88.14
152.47
524.29
410.80
298.60
254.28
52.70
1540.68
101.03
194.31
770.70
419.54
326.52
278.06
53.59
1848.42
110.40
236.87
1090.38
428.46
324.44
301.41
54.51
2199.20
115.98
278.72
1453.56
437.58
316.81
323.74
55.43
2587.12
119.73
320.57
1858.55
446.88
304.24
345.45
56.37
3011.50
122.24
362.42
2264.25
456.39
321.11
364.61
57.33
3463.69
123.93
404.27
Accumulated Depreciation
Total Investments and Advances
Intangible Assets
Deferred Tax Assets
Other Assets
Total Assets
36.96
23.19
48.40
58.58
4.41
1,362.40
47.21
21.39
54.65
59.50
3.58
1,043.33
64.32
9.79
65.77
63.61
10.15
1,420.51
93.280
10.87
65.68
68.09
6.19
1,792.55
126.472
12.06
65.63
65.84
6.77
2,109.12
162.742
13.39
65.58
61.55
7.33
2,463.04
200.844
14.86
65.53
57.09
7.88
2,852.21
240.177
16.50
65.48
52.63
8.40
3,276.76
280.336
18.32
65.43
47.99
8.87
3,728.23
Liabilities & Equity
ST Debt & Current Portion of LT Debt
Accounts Payable
Income Tax Payable
Other Current Liabilities
Total Current Liabilities
0.00
113.45
11.00
141.65
266.09
0.00
127.33
5.47
155.75
288.55
0.00
119.38
9.36
187.28
316.01
0.00
146.25
6.74
200.82
353.81
0.00
159.93
7.55
219.60
387.08
0.00
173.36
8.19
238.03
419.58
0.00
186.20
8.80
255.67
450.68
0.00
198.68
9.40
272.81
480.90
0.00
209.70
9.94
287.94
507.59
Deferred Income
Total Liabilities
117.15
383.24
110.38
398.93
112.22
428.23
214.28
568.09
234.32
621.40
253.99
673.57
272.81
723.49
291.10
772.00
307.24
814.83
230.29
1,168.64
288.97
1,508.66
369.10
1,847.33
369.10
2,276.97
369.14
2,737.68
369.15
3,236.89
369.16
3,773.61
369.16
4,347.11
369.17
4,953.22
(1.55)
0.00
(418.23)
979.16
1,362.40
0.55
1.53
(1,155.31)
644.40
1,043.33
(1.23)
0.00
(1,222.91)
992.28
1,420.51
(1.23)
0.00
(1,420.39)
1,224.46
1,792.55
(1.23)
0.00
(1,617.86)
1,487.73
2,109.12
(1.23)
0.00
(1,815.33)
1,789.47
2,463.04
(1.23)
0.00
(2,012.81)
2,128.73
2,852.22
(1.23)
0.00
(2,210.28)
2,504.76
3,276.76
(1.23)
0.00
(2,407.75)
2,913.40
3,728.23
Shareholders' Equity
Common Stock and additional paid-in capital
Retained Earnings
Cumulative Translation Adjustment/Unrealized For. Exch.
Gain
Unrealized Gain/Loss Marketable Securities
Treasury Stock
Total Shareholders' Equity
Total Liabilities & Shareholders' Equity
15
MONSTER BEVERAGE CORPORATION
Cash Flow Statement
(Million $)
Fiscal Years Ending Dec. 31
Operating Activities
Net income (loss)
Amortization of trademark
Depreciation & amortization
Loss (gain) on disposal of property & equipment
Stock-based compensation
Loss (gain) on put option
Loss (gain) on investments, net
Deferred income taxes
Tax benefit from exercise of stock options
Provision for (reversal of) doubtful accounts
Accounts receivable
Distributor receivables
Inventories
Prepaid expenses & other current assets
Prepaid income taxes
Accounts payable
Accrued liabilities
Accrued promotional allowances
Accrued distributor terminations
Accrued compensation
Income taxes payable
Deferred revenue
Net Operating Cash Flow
Investing Activities
Maturities of held-to-maturity investments
Sales of available-for-sale investments
Sales of trading investments
Purchases of held-to-maturity investments
Purchases of available-for-sale investments
Purchases of property & equipment
Proceeds from sale of property & equipment
Additions to trademarks
Decrease (increase) in other assets
Net Investing Cash Flow
Financing Activities
Principal payments on debt
Tax benefit from exercise of stock options
Issuance of common stock
Purchases of common stock held in treasury
Net Financing Cash Flow
Net increase (decrease) in cash & cash equivalents
Cash & cash equivalents, beginning of year
Cash & cash equivalents, end of year
16
2011
2012
2013
286.22
0.05
17.03
(0.02)
19.42
0.73
0.04
(0.69)
(3.82)
0.05
(56.75)
(0.26)
(4.47)
(6.21)
9.47
26.25
8.14
28.44
(0.33)
2.88
13.92
(6.28)
333.83
340.02
0.05
20.51
0.03
28.41
1.11
(1.90)
(2.46)
(19.66)
(0.01)
(17.77)
0.00
(47.57)
(4.52)
(33.21)
3.66
6.46
2.72
0.79
2.50
14.17
(5.66)
287.68
338.66
0.05
22.71
0.51
28.76
0.84
(3.55)
(7.07)
(30.35)
0.13
(43.03)
(7.38)
(21.55)
(4.50)
24.01
(8.20)
2.27
8.93
1.55
1.97
34.31
2.98
342.03
407.92
30.55
34.72
(583.14)
(33.31)
(25.55)
0.52
(5.13)
0.41
(173.03)
841.58
68.45
17.05
(597.16)
(9.50)
(42.94)
0.29
(6.30)
0.38
271.85
256.84
5.79
2.25
(557.42)
-(40.76)
9.02
(11.18)
(4.36)
(339.81)
(1.94)
3.82
20.32
(176.39)
(154.19)
(2.08)
19.66
11.02
(727.67)
(699.08)
(1.89)
30.35
21.25
(67.60)
(17.89)
4.49
354.84
359.33
(136.82)
359.33
222.51
(11.17)
222.51
211.35
MONSTER BEVERAGE CORPORATION
Cash Flow Statement
(Million $)
Fiscal Years Ending Dec. 31
Operating Activities
Net Income
Add: Depreciation & amortization
Changes in Working Capital
Change in deferred taxes
Accounts receivable
Inventories
Prepaid expenses & other current assets
Change in accrued compensation and other liabilities
Accounts payable
Income taxes payable
Deferred revenue
Net Operating Cash Flow
Investing Activities
Change in short-term investments
Change in long-term investments
Capital Expenditure
Capitalization of intangible assets
Decrease (increase) in other assets
Net Investing Cash Flow
Financing Activities
change in current portion of long term debt
Change in accumulated other comprehensive income
Issuance of common stock
Repurchases of common stock
Net Financing Cash Flow
Cash & cash equivalents, beginning of year
Net increase (decrease) in cash & cash equivalents
Cash & cash equivalents, end of year
2014E
2015E
2016E
2017E
2018E
2019CV
429.65
29.05
460.70
33.28
499.22
36.36
536.72
38.19
573.49
39.42
606.11
40.25
(4.48)
(2.42)
(32.83)
(0.88)
13.54
26.88
(2.62)
102.06
557.94
2.25
(27.92)
(23.78)
(0.90)
18.78
13.68
0.81
20.04
496.95
4.29
2.08
(23.35)
(0.91)
18.44
13.43
0.63
19.67
569.86
4.46
7.64
(22.33)
(0.93)
17.64
12.85
0.61
18.82
613.67
4.46
12.57
(21.70)
(0.94)
17.14
12.48
0.60
18.29
655.81
4.64
(16.87)
(19.16)
(0.96)
15.13
11.02
0.53
16.15
656.84
(8.56)
(1.08)
(41.85)
0.00
3.96
(47.52)
(8.74)
(1.20)
(42.56)
(0.04)
(0.58)
(53.11)
(8.92)
(1.33)
(41.85)
(0.04)
(0.57)
(52.71)
(9.11)
(1.47)
(41.85)
(0.04)
(0.54)
(53.02)
(9.31)
(1.64)
(41.85)
(0.04)
(0.53)
(53.36)
(9.51)
(1.82)
(41.85)
(0.04)
(0.47)
(53.68)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.04
0.01
0.01
0.01
(197.47) (197.47) (197.47) (197.47) (197.47)
(197.47) (197.43) (197.47) (197.47) (197.47)
211.35
524.29
770.70 1090.38 1453.56
312.94
246.40
319.68
363.18
404.99
524.29
770.70 1090.38 1453.56 1858.55
0.00
0.00
0.01
(197.47)
(197.47)
1858.55
405.70
2264.25
17
MONSTER BEVERAGE CORPORATION
Common Size Income Statement
Fiscal Years Ending Dec. 31
Sales
COGS excluding D&A
Depreciation
Amortization of Intangibles
Gross Income
SG&A Expense
EBIT (Operating Income)
Non-operating Income - Net
Non-operating Interest Income
Other Income (Expense)
Interest Expense
Unusual Expense - Net
Pretax Income
Income Taxes
Consolidated Net Income
Net Income
2011
100.00%
46.49%
1.00%
0.00%
52.51%
25.71%
26.80%
0.10%
0.10%
0.00%
0.00%
0.04%
26.85%
10.04%
16.80%
16.80%
2012
100.00%
47.29%
1.00%
0.00%
51.71%
24.99%
26.72%
(0.02%)
0.07%
(0.09%)
-0.05%
26.65%
10.15%
16.50%
16.50%
2013
100.00%
46.77%
1.01%
0.00%
52.21%
26.23%
25.98%
(0.36%)
0.04%
(0.41%)
-0.52%
25.10%
10.03%
15.08%
15.08%
18
2014E
100.00%
46.21%
1.16%
0.00%
52.62%
24.38%
28.25%
0.13%
0.05%
0.08%
0.00%
0.00%
28.50%
11.23%
17.27%
17.27%
2015E
100.00%
46.21%
1.22%
0.00%
52.57%
24.38%
28.19%
0.13%
0.05%
0.08%
0.00%
0.00%
28.44%
11.51%
16.93%
16.93%
2016E
100.00%
46.21%
1.23%
0.00%
52.56%
24.38%
28.18%
0.13%
0.05%
0.08%
0.00%
0.00%
28.43%
11.51%
16.93%
16.93%
2017E
100.00%
46.21%
1.20%
0.00%
52.59%
24.38%
28.21%
0.13%
0.05%
0.07%
0.00%
0.00%
28.46%
11.52%
16.94%
16.94%
2018E
100.00%
46.21%
1.16%
0.00%
52.63%
24.38%
28.25%
0.13%
0.05%
0.07%
0.00%
0.00%
28.50%
11.53%
16.97%
16.97%
2019CV
100.00%
46.21%
1.13%
0.00%
52.66%
24.38%
28.29%
0.13%
0.06%
0.07%
0.00%
0.00%
28.54%
11.55%
16.99%
16.99%
MONSTER BEVERAGE CORPORATION
Common Size Balance Sheet
Fiscal Years Ending Dec. 31
Asset
Current Assets
Cash
Short Term Investments
Accounts Receivables, Net
Inventories
Other Current Assets
Total Current Assets
Net Property, Plant & Equipment
Property, Plant & Equipment - Gross
Accumulated Depreciation
Total Investments and Advances
Intangible Assets
Deferred Tax Assets
Other Assets
Total Assets
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
2019CV
21.10%
24.15%
12.84%
9.14%
2.21%
69.44%
2.65%
4.82%
2.17%
1.36%
2.84%
3.44%
0.26%
79.99%
10.80%
4.71%
11.49%
9.86%
3.67%
40.52%
3.36%
5.65%
2.29%
1.04%
2.65%
2.89%
0.17%
50.63%
9.41%
17.91%
13.18%
9.86%
2.31%
52.66%
3.92%
6.79%
2.86%
0.44%
2.93%
2.83%
0.45%
63.23%
30.97%
16.51%
12.00%
10.22%
2.35%
72.05%
4.06%
7.81%
3.75%
0.00%
2.64%
2.74%
0.25%
81.73%
40.07%
15.42%
12.00%
10.22%
2.39%
80.10%
4.06%
8.71%
4.65%
0.00%
2.41%
2.42%
0.25%
89.23%
49.28%
14.53%
11.00%
10.22%
2.43%
87.45%
3.93%
9.45%
5.52%
0.00%
2.22%
2.09%
0.25%
95.95%
58.67%
13.81%
10.00%
10.22%
2.47%
95.16%
3.78%
10.12%
6.34%
0.00%
2.07%
1.80%
0.25%
103.06%
66.98%
13.22%
9.00%
10.22%
2.51%
101.93%
3.62%
10.72%
7.10%
0.00%
1.94%
1.56%
0.25%
109.29%
0.00%
12.79%
9.00%
10.22%
2.55%
34.56%
3.47%
11.33%
7.86%
0.00%
1.83%
1.34%
0.25%
41.47%
Liabilities & Shareholders' Equity
Current Liabilities
ST Debt & Current Portion of LT Debt
Accounts Payable
Income Tax Payable
Other Current Liabilities
Total Current Liabilities
0.00%
6.66%
0.65%
8.32%
15.62%
0.00%
6.18%
0.27%
7.56%
14.00%
0.00%
5.31%
0.42%
8.34%
14.07%
0.00%
5.88%
0.27%
8.07%
14.22%
0.00%
5.88%
0.28%
8.07%
14.23%
0.00%
5.88%
0.28%
8.07%
14.23%
0.00%
5.88%
0.28%
8.07%
14.23%
0.00%
5.88%
0.28%
8.07%
14.23%
0.00%
5.88%
0.28%
8.07%
14.23%
Deferred Income
Total Liabilities
6.88%
22.50%
5.36%
19.36%
5.00%
19.06%
8.61%
22.83%
8.61%
22.84%
8.61%
22.84%
8.61%
22.84%
8.61%
22.84%
8.61%
22.84%
13.52%
68.61%
14.02%
73.21%
16.43%
82.23%
14.83%
91.51%
13.57%
100.61%
12.52%
109.74%
11.65%
119.11%
10.92%
128.60%
10.35%
138.83%
(0.09%)
0.00%
(24.56%)
57.49%
79.99%
0.03%
0.07%
(56.06%)
31.27%
50.63%
(0.05%)
0.00%
(54.44%)
44.17%
63.23%
(0.05%)
0.00%
(57.08%)
49.21%
72.04%
(0.05%)
0.00%
(59.46%)
54.68%
77.51%
(0.04%)
0.00%
(61.55%)
60.67%
83.51%
(0.04%)
0.00%
(63.53%)
67.19%
90.03%
(0.04%)
0.00%
(65.38%)
74.10%
96.93%
(0.03%)
0.00%
(67.48%)
81.66%
104.49%
Shareholders' Equity
Common Stock Par/Carry Value
Retained Earnings
Cumulative Translation Adjustment/Unrealized For. Exch.
Gain
Unrealized Gain/Loss Marketable Securities
Treasury Stock
Total Shareholders' Equity
Total Liabilities & Shareholders' Equity
19
MONSTER BEVERAGE CORPORATION
Weighted Average Cost of Capital (WACC) Estimation
(Million $)
Risk Free Rate
Risk Premium
Beta
Cost of Equity
Pre-tax cost of debt
Marginal Tax Rate
After-tax cost of debt
Cost of Preferred Stock
3.07%
4.64%
1.04
7.89%
2.98%
36.00%
1.91%
0
Market Value of Debt
Pre-Tax Cost of Debt
Marginal Tax Rate
16.15
2.98%
36.00%
Market Value of Equity
Cost of Equity
Market Value of preferred
Cost of Preferred Stock
WACC
18246.96
7.89%
0
0
7.88%
20
MONSTER BEVERAGE CORPORATION
Value Driver Estimation
(Million $)
Fiscal Years Ending Dec. 31
Revenue
Less: Cost of Sales
Less: Sell, General and Administrative Expense
Less: Amortization of non-goodwill Intangibles
Less: Depreciation
Add: Implied Operating Lease Interest
EBITA
Income Tax Provision
Add: Tax Shield on Lease Interest
Add: Tax Shield on Interest Expense
Less: Tax on Interest ( or Investment) Income
Less: Tax Non-Operating income
Total Adjusted Taxes
Change in Deferred Taxes
NOPLAT
2011
1703.23
791.84
437.89
0.05
17.03
0.49
456.92
171.05
0.18
0.02
0.60
0.58
170.06
(0.10)
286.75
2012
2060.70
974.48
515.03
0.05
20.51
0.43
551.05
209.13
0.15
0.00
0.50
(0.13)
208.92
(0.93)
341.21
2013
2246.43
1050.74
589.22
0.05
22.71
0.48
584.20
225.23
0.17
0.00
0.36
(2.95)
227.99
(4.11)
352.10
2014E
2488.35
1149.82
606.59
0.09
28.96
0.59
703.47
279.46
0.21
0.00
0.00
0.00
279.67
(4.48)
419.32
2015E
2721.03
1257.34
663.31
0.09
33.19
0.65
767.74
313.20
0.23
0.00
0.43
1.12
311.88
2.25
458.11
2016E
2949.50
1362.91
719.01
0.09
36.27
0.68
831.89
339.38
0.24
0.00
0.48
1.23
337.92
4.29
498.26
2017E
3168.05
1463.91
772.28
0.09
38.10
0.70
894.37
364.88
0.25
0.00
0.53
1.33
363.27
4.46
535.56
2018E
3380.44
1562.05
824.06
0.09
39.33
0.71
955.63
389.88
0.26
0.00
0.59
1.43
388.12
4.46
571.97
2019CV
3567.93
1648.68
869.76
0.09
40.16
0.72
1009.96
412.05
0.26
0.00
0.65
1.52
410.13
4.64
604.47
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
2019CV
17.97
218.74
155.61
37.71
430.03
11.13
236.71
203.11
75.70
526.64
10.57
296.18
221.45
51.82
580.01
26.21
298.60
254.28
52.70
631.80
38.53
326.52
278.06
53.59
696.71
54.52
324.44
301.41
54.51
734.88
72.68
316.81
323.74
55.43
768.66
92.93
304.24
345.45
56.37
798.99
113.21
321.11
364.61
57.33
856.26
113.45
117.15
11.00
241.59
188.44
45.15
48.40
16.49
27.60
326.08
127.33
110.38
5.47
243.18
283.45
69.14
54.65
14.43
24.97
446.63
119.38
112.22
9.36
240.95
339.06
88.14
65.77
16.15
19.94
529.06
146.25
214.28
6.74
367.27
264.53
101.03
65.68
19.79
17.06
468.09
159.93
234.32
7.55
401.80
294.92
110.40
65.63
21.63
18.83
511.41
173.36
253.99
8.19
435.53
299.35
115.98
65.58
22.72
20.73
524.36
186.20
272.81
8.80
467.81
300.85
119.73
65.53
23.46
22.74
532.30
198.68
291.10
9.40
499.19
299.80
122.24
65.48
23.95
24.91
536.38
209.70
307.24
9.94
526.89
329.38
123.93
65.43
24.28
27.19
570.21
ROIC
Fiscal Years Ending Dec. 31
NOPLAT
Beg. Invested Capital
ROIC
2011
286.75
247.67
115.78%
2012
341.21
326.08
104.64%
2013
352.10
446.63
78.83%
2014E
419.32
529.06
79.26%
2015E
458.11
468.09
97.87%
2016E
498.26
511.41
97.43%
2017E
535.56
524.36
102.14%
2018E
571.97
532.30
107.45%
2019CV
604.47
536.38
112.69%
FCF
Fiscal Years Ending Dec. 31
NOPLAT
Change in Invested Capital
FCF
2011
286.75
78.41
208.35
2012
341.21
120.56
220.65
2013
352.10
82.43
269.67
2014E
419.32
(60.97)
480.29
2015E
458.11
43.32
414.80
2016E
498.26
12.95
485.32
2017E
535.56
7.95
527.61
2018E
571.97
4.08
567.89
2019CV
604.47
33.83
570.64
EP
Fiscal Years Ending Dec. 31
Beg. Invested Capital
ROIC
WACC
Economic Profit
2011
247.67
1.16
7.88%
267.23
2012
326.08
1.05
7.88%
315.51
2013
446.63
0.79
7.88%
316.90
2014E
529.06
0.79
7.88%
377.63
2015E
468.09
0.98
7.88%
421.22
2016E
511.41
0.97
7.88%
457.96
2017E
524.36
1.02
7.88%
494.24
2018E
532.30
1.07
7.88%
530.02
2019CV
536.38
1.13
7.88%
562.19
Invested Capital
Fiscal Years Ending Dec. 31
Operating Current Assets
Normal Cash
Accounts Receivable
Inventory
Other Current Operating Assets
Operating Current Assets
Operating Current Liabilities
Accounts Payable
Deferred Income
Income Taxes Payable
Operating Current Liabilities
Net Operating Working Capital
Add: Net PPE
Add: Intangibles
Add: PV of operating lease
Add: Other Operating Assets
Invested Capital
21
MONSTER BEVERAGE CORPORATION
Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models
(Million $)
Key Inputs:
CV Growth
CV ROIC
WACC
Cost of Equity
Fiscal Years Ending Dec. 31
DCF Model
FCF
FCF Continuing Value
WACC
Period
Present Value of FCF
Value of operating Assets
Add: Excess Cash
Add: Short term investment
Add: Long term Investment
Less: Present Value of operating lease
Less: employee stock option
Value of Equity
Shares Outstanding
Intrinsic Value
Partial Year Adjustment
Fiscal Years Ending 0.11
EP
CV EP
WACC
Period
Present Value of EP
Beginning invested capital
Value of operating Assets
Add: Excess Cash
Add: Short term investment
Add: Long term Investment
Less: Present Value of operating lease
Less: employee stock option
Value of the Firm
Shares Outstanding
Intrinsic Value
Partial Year Adjustment
5.55%
112.69%
7.88%
7.89%
2014E
2015E
2016E
2017E
2018E
2019CV
480.29
414.80
485.32
527.61
567.89
570.64
24654.12
7.88%
1
445.20
2
356.41
3
386.53
4
389.53
5
388.64
5
16871.90
2014E
377.63
2015E
421.22
2016E
457.96
2017E
494.24
2018E
530.02
2019CV
562.19
24117.74
7.88%
1
350.04
529.06
2
361.93
3
364.75
4
364.88
5
362.72
5
16504.83
18838.20
498.08
410.80
10.87
16.15
1.27
19740.54
165.03
119.62
128.24
18838.20
498.08
410.80
10.87
16.15
1.27
19740.54
165.03
119.62
128.24
22
MONSTER BEVERAGE CORPORATION
Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
Fiscal Years Ending Dec. 31
EPS
Key Assumptions
CV growth
CV ROE
Cost of Equity
Future Cash Flows
P/E Multiple
2014E
$
2.60 $
2015E
2.82 $
2016E
2017E
3.08 $
3.35 $
2018E
2019CV
3.61 $
3.84
5.69%
20.80%
7.89%
33.05
EPS(next period)
$
Future Stock Price
$ 126.89
Dividends Per Share
Period
Discounted Cash Flows
Intrinsic Value
Partial Year Adjustment
3.84
-1
-2
-3
-4
-5
$ 126.89
5
--
--
--
--
--
$ 86.81
$ 86.81
93.07
23
MONSTER BEVERAGE CORPORATION
Relative Valuation Models
Price
EPS
2014E
EPS
2015E
Coca Cola Company
$ 41.88
$2.06
$2.11 20.3
19.8
$
6.35 3.20
3.13
PEP
Pepsico Inc
$ 96.17
$4.60
$4.91 20.9
19.6
$
3.69 5.67
5.31
DPS
Dr Pepper Snapple Group Inc
$ 69.25
$3.63
$3.87 19.1
17.9
$ 13.74
Ticker
Company
KO
Average
MNST
MONSTER BEVERAGE CORPORATION
$ 101.20 $
2.60 $
Implied Value:
Relative P/E (EPS14)
$ 52.35
Relative P/E (EPS15)
$ 53.90
PEG Ratio (EPS14)
$ 26.62
PEG Ratio (EPS15)
$ 27.37
24
P/E 14
Est.
5yr Gr.
P/E 15
20.1
19.1
2.82 38.9
35.9
PEG 14
PEG 15
1.39
1.30
3.4
3.2
2.99 13.0
12.0
MONSTER BEVERAGE CORPORATION
Key Management Ratios
Fiscal Years Ending Dec. 31
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
2019E
Liquidity Ratios
Current Ratio
Current Asset/Current Liabilities
3.96
2.25
2.60
2.86
2.96
3.12
3.29
3.47
3.65
Quick Ratio
(Cash+ST Investment+AR)/CL
3.72
1.93
2.88
3.49
3.92
4.39
4.90
5.43
5.99
Cash Ratio
Cash/ CL
1.35
0.77
0.67
1.48
1.99
2.60
3.23
3.86
4.46
Activity or Asset-Management Ratios
Receivable Turnover Ratio
Net Sales/Accounts Receivables
7.79
8.71
7.58
0.00
7.62
8.39
9.31
10.41
10.53
Inventory Turnover Ratio
COGS/Inventory
5.09
4.80
4.74
0.00
4.14
4.17
4.21
4.24
4.28
Total Asset Turnover Ratio
Net Sales/Total Assets
1.25
1.98
1.58
0.00
1.18
1.10
1.03
0.97
0.91
Total Debt/Total Assets
Total Liabilities/Stockholder's
Equity
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.39
0.62
0.43
0.46
0.42
0.38
0.34
0.31
0.28
Financial Leverage Ratios
Debt Ratio
Debt to Equity Ratio
Profitability Ratios
Net Profit Margin
Net Income/Net Sales
16.80%
16.50%
15.08%
17.27%
16.93%
16.93%
16.94%
16.97%
16.99%
Return on Assets
Net Income/Total Assets
21.01%
32.59%
23.84%
23.97%
21.84%
20.27%
18.82%
17.50%
16.26%
Return on Equity
Net Income/Stockholder's Equity
29.23%
52.77%
34.13%
35.09%
30.97%
27.90%
25.21%
22.90%
20.80%
Payout Policy Ratios
Payout Ratio
Dividend per Share/EPS
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total Payout Ratio
Dividend Repurchases/Net Income
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
25
MONSTER BEVERAGE CORPORATION
Lease
Present Value of Operating Lease Obligations
2013
Present Value of Operating Lease Obligations
2011
Operating
Leases
5050
4958
4207
1089
493
1577
17374
Fiscal Years Ending Dec. 31
2014
2015
2016
2017
2018
Thereafter
Total Minimum Payments
Less: Interest
1228
PV of Minimum Payments
16146
Capitalization of Operating Leases
Pre-Tax Cost of Debt
Number Years Implied by Year 6
Payment
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
2.98%
Lease
Commitment
5050
4958
4207
1089
493
1577
1.0
PV Lease
Payment
4903.7
4674.8
3851.8
968.2
425.6
1321.9
16146.0
2012
Fiscal Years Ending Dec. 31
2013
2014
2015
2016
2017
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Capitalization of Operating Leases
Pre-Tax Cost of Debt
Number Years Implied by Year 6 Payment
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
Operating
Leases
3996
3385
3227
3241
2783
1411
18043
Fiscal Years Ending Dec. 31
2012
2013
2014
2015
2016
Thereafter
Total Minimum Payments
1550
Less: Interest
PV of Minimum Payments
Capitalization of Operating Leases
Pre-Tax Cost of Debt
Number Years Implied by Year
6 Payment
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
Present Value of Operating Lease Obligations
2009
Lease
Commitment
3996
3385
3227
3241
2783
1411
2.98%
1.0
PV Lease Payment
4173
4052.1
3610
3403.8
3482
3188.0
2874
2555.1
790
682.0
649
544.0
14425.0
Total Minimum Payments
19338
Less: Interest
2106
16493
PV of Minimum Payments
17232
2.98%
Capitalization of Operating Leases
Pre-Tax Cost of Debt
Number Years Implied by Year 6 Payment
2.98%
1.0
1.0
PV Lease
Payment
3880.2
3191.7
2954.5
2881.4
2402.5
1182.8
16493.1
Year
1
2
3
4
5
PV of Minimum Payments
Lease
Commitment
3276
2513
2582
2453
8514
PV Lease
Payment
3181.1
2369.5
2364.0
2180.8
7137.0
17232.4
2008
2010
Operating
Leases
4173
3610
3482
2874
790
649
15578
1153
14425
Operating
Leases
3276
2513
2582
2453
8514
Fiscal Years Ending Dec. 31
2010
2011
2012
2013
2014& Thereafter
Operating
Leases
3366
3221
3039
3027
6535
Fiscal Years Ending Dec. 31
2011
2012
2013
2014
2015
Fiscal Years Ending Dec. 31
2009
2010
2011
2012
2013
Operating
Leases
3156
2845
2143
2255
9865
Total Minimum Payments
19188
Less: Interest
1931
PV of Minimum Payments
17257
Capitalization of Operating Leases
Pre-Tax Cost of Debt
2.98%
Number Years Implied by Year 6 Payment
1.0
Year
PV Lease Payment
1
3366
3268.5
2
3221
3037.5
3
3039
2782.4
4
3027
2691.4
5
6535
5478.1
Total Minimum Payments
20264
Less: Interest
2281
PV of Minimum Payments
17983
Capitalization of Operating Leases
Pre-Tax Cost of Debt
2.98%
Number Years Implied by Year 6 Payment
1.0
Year
PV Lease Payment
1
3156
3064.6
2
2845
2682.5
3
2143
1962.1
4
2255
2004.8
5
9865
8268.5
PV of Minimum Payments
PV of Minimum Payments
17257.1
26
17983.4
Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding
Number of Options Outstanding (shares):
Average Time to Maturity (years):
Expected Annual Number of Options Exercised:
Current Average Strike Price:
Cost of Equity:
Current Stock Price:
12,973
3.74
3,467
$
$
15.71
7.89%
110.07
2014E
43
2.09
90
Increase in Shares Outstanding:
Average Strike Price:
Increase in Common Stock Account:
$
Change in Treasury Stock
Expected Price of Repurchased Shares:
Number of Shares Repurchased:
197,473,500
$
110.07
1,794,072
Shares Outstanding (beginning of the year)
Plus: Shares Issued Through ESOP
Less: Shares Repurchased in Treasury
Shares Outstanding (end of the year)
166,822,000
43
1,794,072
165,027,971
$
$
2015E
6,868
5.95
40,842
197,473,500
118.75
1,662,928
165,027,971
6,868
1,662,928
163,371,911
27
$
$
2016E
481
14.65
7,037
$
2017E
481
14.65
7,037
$
2018E
481
14.65
7,037
$
2019E
481
14.65
7,037
197,473,500
128.12
1,541,371
197,473,500
$
138.22
1,428,699
197,473,500
$
149.12
1,324,263
197,473,500
$
160.88
1,227,462
163,371,911
481
1,541,371
161,831,021
161,831,021
481
1,428,699
160,402,802
160,402,802
481
1,324,263
159,079,020
159,079,020
481
1,227,462
157,852,038
VALUATION OF OPTIONS GRANTED IN ESOP
Ticker Symbol
Current Stock Price
MNST
110.07
Risk Free Rate
3.07%
Current Dividend Yield
0.00%
Annualized St. Dev. of Stock Returns
Range of Outstanding Options
Range 1
Range 2
Range 3
Range 4
Range 5
Range 6
Range 7
Range 8
Range 9
Range 10
Total
36.80%
Number of Shares
43
4,400
23
2,445
145
1,777
1,381
1,796
956
7
12,973
Average Exercise Price
2.09
3.29
6.11
8.44
13.43
15.86
17.75
33.11
56.25
74.78
$
15.71
28
Average Remaining Life (yrs.)
1.00
1.20
1.80
1.90
4.80
4.40
5.90
7.30
9.10
8.50
3.74
B-S Option Price
$ 108.04
$ 106.90
$ 104.29
$ 102.11
$
98.50
$
96.25
$
95.40
$
85.28
$
75.06
$
65.73
$
96.08
Value of Options Granted
$
4,646
$
470,356
$
2,399
$
249,655
$
14,283
$
171,028
$
131,753
$
153,163
$
71,758
$
460
$ 1,269,500
Beta
Equity Risk Premium
$ 128.24
4.56%
4.58%
4.60%
4.62%
4.64%
4.68%
4.68%
4.70%
4.72%
1.00
143.33
142.02
140.74
139.48
138.24
135.83
135.83
134.66
133.51
1.01
140.38
139.12
137.87
136.65
135.45
133.12
133.12
131.99
130.87
1.02
137.56
136.33
135.12
133.94
132.78
130.52
130.52
129.42
128.34
1.03
134.84
133.66
132.49
131.34
130.22
128.03
128.03
126.96
125.92
1.04
132.76
131.60
130.46
129.34
128.24
126.11
126.11
125.06
124.04
1.05
129.75
128.63
127.53
126.45
125.39
123.33
123.33
122.32
121.34
1.06
127.34
126.26
125.19
124.15
123.12
121.11
121.11
120.14
119.18
1.07
125.03
123.98
122.94
121.93
120.93
118.98
118.98
118.03
117.09
1.08
122.81
121.79
120.78
119.79
118.82
116.92
116.92
116.00
115.09
3.07%
132.76
131.60
130.46
129.34
128.24
126.11
126.11
125.06
124.04
3.17%
127.36
126.30
125.25
124.23
123.22
121.25
121.25
120.29
119.35
3.27%
122.41
121.43
120.47
119.52
118.59
116.77
116.77
115.89
115.02
3.37%
117.84
116.94
116.05
115.17
114.31
112.63
112.63
111.81
111.00
3.47%
113.62
112.78
111.96
111.15
110.35
108.79
108.79
108.02
107.27
1.04
112.54
116.02
119.77
123.83
128.24
133.05
138.31
144.08
150.45
1.05
110.41
113.74
117.32
121.19
125.39
129.96
134.94
140.40
146.41
1.06
108.70
111.91
115.36
119.09
123.12
127.50
132.27
137.48
143.21
1.07
107.04
110.14
113.47
117.05
120.93
125.13
129.70
134.69
140.16
1.08
105.43
108.43
111.64
115.09
118.82
122.85
127.24
132.01
137.24
7.88%
112.54
116.02
119.77
123.83
128.24
133.05
138.31
144.08
150.45
8.08%
105.29
108.27
111.47
114.91
118.63
122.65
127.01
131.77
136.98
8.28%
98.93
101.51
104.26
107.21
110.37
113.78
117.45
121.43
125.75
8.48%
93.34
95.59
97.98
100.53
103.25
106.16
109.29
112.66
116.29
8.68%
88.38
90.35
92.45
94.67
97.03
99.55
102.25
105.13
108.22
Risk Free Rate
Equity Risk Premium
$ 128.24
4.56%
4.58%
4.60%
4.62%
4.64%
4.68%
4.68%
4.70%
4.72%
2.67%
160.17
158.45
156.78
155.14
153.54
150.44
150.44
148.94
147.46
2.77%
152.26
150.72
149.21
147.73
146.28
143.48
143.48
142.11
140.78
2.87%
145.12
143.73
142.36
141.02
139.71
137.15
137.15
135.91
134.70
2.97%
138.65
137.38
136.14
134.92
133.72
131.39
131.39
130.25
129.14
Beta
CV Growth
$ 128.24
5.15%
5.25%
5.35%
5.45%
5.55%
5.65%
5.75%
5.85%
5.95%
1.00
119.90
123.92
128.29
133.04
138.24
143.94
150.22
157.18
164.94
1.01
117.87
121.74
125.93
130.48
135.45
140.90
146.88
153.50
160.85
1.02
115.90
119.63
123.65
128.02
132.78
137.98
143.70
149.99
156.97
1.03
114.01
117.59
121.46
125.66
130.22
135.20
140.65
146.65
153.28
WACC
CV Growth
$ 128.24
5.15%
5.25%
5.35%
5.45%
5.55%
5.65%
5.75%
5.85%
5.95%
7.08%
156.84
164.24
172.50
181.77
192.25
204.20
217.95
233.93
252.73
7.28%
142.66
148.64
155.24
162.55
170.72
179.89
190.25
202.07
215.66
7.48%
130.91
135.83
141.21
147.12
153.65
160.89
168.96
178.02
188.27
7.68%
121.02
125.13
129.60
134.46
139.78
145.63
152.08
159.24
167.22
29
30