DCF Studio

    MNST · NMS · Consumer Defensive

    Monster Beverage Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 19.63

    Market price

    USD 44.71

    Implied upside

    -56.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 3.2% of revenue against depreciation of 1.1%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 33.5x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 19.63-56.1%
    Exit multiple
    USD 31.06-30.5%
    Market price
    USD 44.71

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 9.1bnUSD 10.0bnUSD 10.9bnUSD 11.9bnUSD 13.1bn+9.5%
    EBITUSD 2.4bnUSD 2.7bnUSD 2.9bnUSD 3.2bnUSD 3.5bn+9.5%
    NOPATUSD 1.9bnUSD 2.1bnUSD 2.3bnUSD 2.5bnUSD 2.8bn+9.5%
    Add depreciation & amortisationUSD 99.7mUSD 109.2mUSD 119.6mUSD 131.0mUSD 143.5m+9.5%
    Less capital expenditureUSD -287.1mUSD -314.4mUSD -344.4mUSD -377.3mUSD -413.2m+9.5%
    Less increase in working capitalUSD -57.1mUSD -62.6mUSD -68.5mUSD -75.1mUSD -82.2m+9.5%
    Free cashflow to firmUSD 1.7bnUSD 1.8bnUSD 2.0bnUSD 2.2bnUSD 2.4bn+9.5%
    Discount factor0.95910.88220.81160.74650.6867-
    Present valueUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.7bnUSD 1.7bn+0.8%
    Present Value Of The ForecastUSD 8.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.675Reported 0.515, pulled toward 1.0 (Blume)
    Cost of equity8.71%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 87.6bn100.0% of capital
    Total debtUSD 0.000.0% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.71%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 19.63

    77% of EV

    Forecast FCFF, final year
    USD 2.4bn
    Capex at depreciation, working capital in reinvestment
    USD 2.8bn
    Less reinvestment at g/ROIC (11.9% of NOPAT)
    USD -331.0m
    Capitalised
    USD 2.4bn
    ROIC (reported)
    21.0%
    Terminal value, undiscounted
    USD 40.3bn
    Terminal value, discounted
    USD 27.7bn
    Enterprise value
    USD 35.9bn
    Less net debt
    USD -2.8bn
    Equity value
    USD 38.6bn

    Exit at 20.0x EBITDA

    Value per shareUSD 31.06

    86% of EV

    Terminal value, undiscounted
    USD 73.1bn
    Terminal value, discounted
    USD 50.2bn
    Enterprise value
    USD 58.4bn
    Less net debt
    USD -2.8bn
    Equity value
    USD 61.2bn

    Spread between methods: 45%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.71%24.7926.3728.3230.7834.01
    7.71%20.9721.9623.1424.5626.32
    8.71%18.2118.8719.6320.5221.57
    9.71%16.1316.5817.1017.6818.36
    10.71%14.5014.8215.1815.5816.04

    Outlined: this model. Green text: above today's price of 44.71. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year9.5%32.3%+22.8pp
    EBIT margin26.8%62.6%+35.8pp
    Discount rate8.7%5.1%-3.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.