Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $MNST 🧘🏽‍♂️

•NTM P/E Ratio: 30.63x
•10-Year Mean: 33.12x

•NTM FCF Yield: 2.98%
•10-Year Mean: 3.05%

As you can see, $MNST appears to be trading near fair value

Going forward, investors can receive ~8% MORE in earnings per share & ~2% LESS in FCF per share 🧠***

Before we get into valuation, let’s take a look at why $MNST is a quality business

BALANCE SHEET✅
•Cash & Short-Term Inv: $3.25B
•Long-Term Debt: $0

$MNST has an excellent balance sheet

RETURN ON CAPITAL✅
•2019: 33.7%
•2020: 31.5%
•2021: 27.4%
•2022: 22.4%
•2023: 24.3%

RETURN ON EQUITY✅
•2019: 28.5%
•2020: 30.2%
•2021: 23.5%
•2022: 17.5%
•2023: 21.4%

$MNST has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2013: $2.25B
•2023: $7.14B
•CAGR: 12.24%

FREE CASH FLOW✅
•2013: $301.27M
•2023: $1.49B
•CAGR: 17.38%

NORMALIZED EPS✅
•2013: $0.34
•2023: $1.54
•CAGR: 16.30%

SHARE BUYBACKS❌
•2013 Shares Outstanding: 1.04B
•LTM Shares Outstanding: 1.05B

MARGINS✅
•LTM Gross Margins: 53.1%
•LTM Operating Margins: 28.2%
•LTM Net Income Margins: 22.8%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~8% MORE in EPS & ~2% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $MNST has to grow earnings at a 15.32% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be slightly less than the (15.32%) required growth rate:

2024E: $1.83 (18.5% YoY) *FY Dec
2025E: $2.07 (13.5% YoY)
2026E: $2.33 (12.4% YoY)

$MNST has a great track record of meeting analyst estimates ~2 years out, so let’s assume $MNST ends 2026 with $2.33 in EPS & see its CAGR potential assuming different multiples

34x P/E: $79.22💵 … ~13.4% CAGR

32x P/E: $74.56💵 … ~10.9% CAGR

30x P/E: $69.90💵 … ~8.4% CAGR

28x P/E: $65.24💵 … ~5.7% CAGR

As you can see, $MNST appears to have attractive return potential if we assume 31x - 34x earnings (33.12x being the 10-Year mean)

There’s always greater risk in assuming multiples >30x, however $MNST often trades above 30x & has the balance sheet, return metrics, consistency, & growth rate that arguably justifies this premium

Today at $56💵 $MNST appears to be trading at a fair price

Yet, I’d likely get more interested in $MNST closer to $50💵 or at ~27.5x earnings (~10.7% below todays price)

At $50, I can reasonably expect ~10% CAGR even when assuming a 28x multiple — a decent margin of safety

#stocks #investing
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
tweet

Giuliano
RT @sidecarcap: Because coordinated investor behavior/herding is what causes prices to swing away (both directions) from intrinsic value. And this is more likely to happen to companies with lots of attention. The information-based views on market efficiency are stale. We’ve gone from not enough info to too much.
tweet

Brandon Beylo
The fact that tin isn’t even on this list tells you everything you need to know.

I wonder what price tin must trade for Big Banks to recognize it.

$40,000 - $60,000/ton?

Chart is inflecting while nobody cares.

#tin

Morgan Stanley Q3 2024 Commodity Forecast

Bullish:

• Copper
• Gold
• Silver
• Nickel

Bearish:

• Uranium

In other words, all systems go for new #uranium highs.

H/t @K3rry_Sun https://t.co/ZCzsorm2r2 - Brandon Beylo
tweet

Brandon Beylo
RT @paulcerro: I love when you go through Twitter and see so many people shilling the next big tech thing or macro point and then you have Brandon who's like the only guy I've seen recently just spread the word on tin, copper and uranium 😂

Nice change of scenery

The fact that tin isn’t even on this list tells you everything you need to know.

I wonder what price tin must trade for Big Banks to recognize it.

$40,000 - $60,000/ton?

Chart is inflecting while nobody cares.

#tin - Brandon Beylo
tweet

Antonio Linares
Welcome to the club on $AMZN's incoming cash flow explosion, Morgan Stanley.

"Morgan Stanley Raises PT to $215, Reinstates 'Top Pick,' Encouraged by 'Multi-Year, Efficiency-Based Cash Flow Story’." https://t.co/QN8fTTgOoA
tweet

Brandon Beylo
Me looking at my commodity positions in my portfolio.

#PGMs #gold #silver #tin #copper https://t.co/PO5XAi4CAm
tweet

Giuliano
I think I heard Howard Marks confirm one of the hypotheses Zeckhauser posits:

'These masters are very generous in sharing their knowledge; for they know they have no competition.'
tweet

Antonio Linares
$PLTR is trading at a generous 23.6 times sales.

Is this cheap or expensive?
tweet

Giuliano
RT @WorldStockss: 🚨 Los Múltiplos y las Empresas de Calidad 🚨

En el artículo demuestro por qué las empresas de calidad cotizan a MÚLTIPLOS ELEVADOS (que no caros) y por qué se INFRAVALORAN.

¡Te veo dentro!

PD: Antes de dar tu opinión, te recomiendo leer el artículo 👀
https://t.co/2mUHpt81g0
tweet

Giuliano
I'm making the necessary arrangements to reach 4 daily hours of reading this year.
tweet