Here is the attached the StockPointer content analysis for this week.
Download Last Thursday afternoon, Coca-Cola announced it was taking a 16.7% stake in Monster Beverage (MNST). At the time of the announcement, Monster was trading at a discount of 9% to StockPointer’s intrinsic value. With limited capital investment, Monster has been able through the years to increase its profits.
Coca-Cola presented the investment as capital efficient. It is easy to see why. Coca-Cola has a return on capital of 11.7% while Monster returned 34.6% on its capital over the last 12 months.
Furthermore, Coca-Cola believes this partnership will create value for its shareholders. Over the last 5 years, Monster’s management has been able to generate positive EVA fairly consistently. With the access to Coca-Cola’s infrastructure, investors can certainly envision the extension of the trend.
