A $10,000 stake in Monster Beverage would need to compound at more than 20 percent a year for a quarter century to reach seven figures, a pace the energy-drink maker has never sustained.
The decade in numbers
Through September 18 the stock gained 263 percent over ten years, a 14 percent annualized clip that would have turned the same $10,000 into roughly $36,000. The S&P 500, including dividends, returned 326 percent over the same stretch, leaving a hypothetical index investor with nearly $43,000. Monster has paid no dividends.
The hurdle rate
At the trailing 14 percent rate, a 25-year horizon yields about $250,000, well short of the million-dollar mark. Bridging the gap requires an annualized return above 20 percent, nearly double the S&P 500’s 10.4 percent historical average over 25 years. The company would need to accelerate growth from a base that has already matured.
The recent quarter
Second-quarter sales rose 17.9 percent year over year to $2.5 billion on a currency-adjusted basis, with the core Monster Energy segment up 19.3 percent to $2.3 billion. The five-year share-price gain of 91.3 percent has barely edged the index’s 90.6 percent, suggesting the market is already pricing in much of the top-line momentum.
The competition question
Staying ahead of rivals and shifting consumer tastes is the open variable. The source notes it is uncertain whether energy drinks have proven staying power or if preferences will migrate elsewhere. The Motley Fool’s Stock Advisor service, which touts a 951 percent average return versus 214 percent for the S&P 500, omitted Monster from its current top-ten list.