The beverage industry, with its robust revenue growth and growing user base, is well positioned to grow and present exciting opportunities in spite of the uncertain economic situation. Let's compare two major players in the beverage sector, Monster Beverage and Celsius Holdings, to determine which is the better choice. Continue reading.
Due to perceived necessity and loyalty of consumers, the demand for soft drinks, alcoholic beverages and other beverages is less affected by economic downturns. This makes this industry a haven for investors looking for stability during uncertain times.
This article will compare the quality beverage stocks Monster Beverage Corporation and Celsius Holdings, Inc.
Let's first look at the outlook for the beverage industry.
In the US, revenue is expected to reach $89.53 billion this year. The upward trend is expected to continue with a CAGR (Compound Annual Growth Rate) of 16%. This will result in a US Market Volume of $162.10 Billion by 2027.
The industry is also witnessing a significant user base that will grow to 83.07 millions users by 2027. The predicted increase in user penetration from 19.8% to 23.9% is expected by 2027. This reflects the growing popularity of beverages.
The average revenue per user is also expected to be $1,35,000. This reflects the potential value and profitability of the industry. These statistics demonstrate the enormous market potential and consumer demands within the beverage industry. This should help MNST and CELH flourish.
CELH returned 97.3% in the last year while MNST only returned 25.3%. CELH has also gained 39.5% over the last nine months, which is more than MNST.
Let's look at the comparison.
MNST launched The Beast Unleashed in select states during the first quarter. This unique creation features a delicious blend of flavors with a 6 percent alcohol content. MNST has received a positive response from the initial launch, which led it to expand distribution to new territories.
MNST also introduced Reign Storm in March. This unique energy drink promotes holistic wellbeing. This innovative product is available in 12 oz sleek cans and caters to the increasing demand for wellness-focused drinks.
In addition, in its recent quarterly results, the company revealed that it was aiming to transition the Monster brand into the Coca-Cola distribution system in the Philippines. This decision is a reflection of their commitment to strengthening the brand and expanding its reach within this important market.
Recent Financial Results
MNST’s net sales increased by 11.9% over the previous year to $1.70billion in the first quarter of fiscal 2023, which ended on March 31, 2023. Gross profit increased 15.6% over the past year to $897.85 millions and operating income was $485.06million, an increase of 21.4%.
Its net income was $397.44 millions and $0.38 a share, an increase of 35.1% and 40% respectively.
CELH, on the other hand, saw its revenues increase 94.9% over the previous year to $259.94 in the first quarter ending March 31, 2023. Gross profit increased by 101.2% to $113.82 millions from the same period last year, and income from operations rose 344% to $44.91million. Its net income also increased by 517.3% to $41.23 millions from the previous quarter.
MNST’s higher revenue indicates a larger client base and a broader distribution reach. This underlines its established position as an industry leader.
MNST revenue and earnings per share grew at CAGRs of 14.6% and 5,8% over the last three years. Analysts predict that MNST will increase its revenue by 12.7% this quarter, 14.4% next quarter and 13.1% for the current year. Analysts expect the company's EPS to increase by 53.9% this quarter, 33% next quarter and 38% for the current year.
CELH, on the other hand grew its revenue at a CAGR (Compound Annual Growth Rate) of 106.3% in the last three years. Analysts predict that the company's revenues will increase by 74.5% this quarter, then 59.9% next quarter and finally 69.5% the following year. The company's EPS should grow by 132.1% during the current quarter.
MNST has higher EBITDA and EBIT margins than CELH, which are negative 15.45% and 151.8% respectively.
MNST has a ROCE, ROTA and ROTC trailing-12-month of 18.16% (14.57%) and 14.64% (negative 112.46% (11.82%), respectively, compared to CELH.
MNST is therefore more profitable.
MNST currently trades at a lower forward EV/Sales multiple of 8.14x than CELH which currently trades at 10.09x. MNST’s forward P/B multiplication of 7.60 is also significantly lower than CELH’s 79.05.
MNST is the most affordable stock.
MNST's overall rating is B, which in our proprietary system translates to Buy. CELH has a rating of C which is equivalent to Neutral. They are calculated by weighing 118 factors to the optimal level.
We also rate each stock according to eight categories. MNST's grade for Stability is B, which is in line with its beta of 0.59 over the past 24 months. CELH's beta for 24 months of 2.08 justifies the grade F it received for Stability.
MNST also has a B grade for quality. The industry average gross profit margin is 31.36%. MNST's 12-month trailing gross profit margin, at 50.77%, is 61.9% greater. Its net income margin for the trailing 12 months of 19.5% is 554.9% greater than the industry average of 3.05%.
CELH is rated C for its Quality. Although its 12-month trailing gross profit margin is higher by 35.2% than the average industry margin of 31.36 %, its 12-month trailing negative net income margin is lower than 3.05%.
MNST ranks 18th among the 37 stocks of the A-rated Beverages Industry, while CELH ranks 33rd.
In addition to the ratings we have given above, we also gave both stocks ratings for Growth, Momentum Value and Sentiment. Click here to see additional information for MNST. Click here to view additional CELH ratings.
Beverage companies are actively incorporating sustainable, healthy solutions into their portfolios in response to ever-changing consumer preferences. This adaptation is in line with the fast pace of consumer change.
A lack of elasticity in the demand for beverage products makes them relatively resilient. The beverage industry is recession-proof because consumers are less likely than ever to give up their favorite beverages.
CELH and MNST should be able to navigate the current economic storms with ease. MNST has a better market position and wider distribution network, as well as a record of consistent growth, compared to CELH.
CELH has relatively low profit margins, and its valuation multiples are also weak. This puts MNST in a far superior position. MNST, in my opinion, is a better pick than CELH for the beverage industry.
According to our research, the chances of investing in stocks that have an Overall Rating Strong Buy or Buy are higher. Here are the best-rated stocks within the Beverages Industry.
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MNST shares traded at $57.45 a share Friday morning. This was down $0.08 (0.14%). MNST shares have gained 13.17% year-to-date compared to a 13.29% increase in the benchmark S&P 500 during the same time period.
Author: Kritika Saarmah
Kritika's passion for writing and interest in risky financial instruments made her an analyst and journalist. She has a bachelor's in commerce, and is currently studying for the CFA. She hopes to identify investment opportunities that are not being explored by investors using her fundamental approach.