Stock splits have generated a lot of interest over the past several years. Most of the headlines centered on the usual suspects. Search giant Alphabet and e-commerce pioneer Amazon each instituted a 20-for-1 split. Electric vehicle (EV) maker Tesla actually had two over the past couple of years, a 3-for-1 split in 2021 and another in 2022. iPhone-maker Apple also pared its shares, with a 4-for-1 stock split in 2020. While a lot of ink was spilled covering these tech giants, there hasn't been nearly as much coverage of a stock split taking place later this month.
If asked to pick the top-performing stock since 2003, most investors would likely pick one of the aforementioned tech companies -- but they'd be wrong. The winner? Monster Beverage(NASDAQ: MNST), one of the most recognizable names in energy drinks over the past 20 years, has parlayed that name recognition into revenue that grew 6,750%, fueling stock-price gains of more than 155,300%.
Image source: Getty Images.
Stock split: Energize
In conjunction with its fourth-quarter financial report, Monster Beverage revealed that its board of directors had approved and declared a 2-for-1 split of its common stock. The split will come in the form of a stock dividend. The new shares will be distributed after close of trading on March 27, and the newly split shares will begin trading after the market opens on March 28.
Existing shareholders won't have to take any action to receive the newly minted shares. Most brokerages take care of the details behind the scenes, and the shares will ultimately be deposited directly into investor accounts once the stock split has taken effect.
Investors shouldn't be alarmed if the new shares don't show up in there account immediately after the market close on March 27. Internal processes vary from brokerage to brokerage, so it's possible that it may take as much as several days for the new shares to show up in their accounts.
Let's add some numbers to put the process into context and provide some much-needed perspective. For each share of Monster Beverage stock a shareholder owns -- currently trading for roughly $104 per share (as of this writing) -- post-split, investors will hold two shares worth $52 each.
Data by YCharts.
Is the stock a buy?
While it's primarily known for its namesake Monster brand, the company is home to a laundry list of energy drinks, including Relentless, Full Throttle, NOS, Mother, Burn, Predator, Reign, and more. In early 2022, the company also made a big move into the alcohol industry, with the acquisition of the CANarchy Craft Brewery collective, which brought a host of craft brewers, including Cigar City, Oskar Blues, Deep Ellum, Perrin Brewing, Squatters, and Wasatch into Monster's portfolio. The company has been working to integrate and leverage these brands, and management said it's making progress.
Even in the face of economic headwinds, Monster generated record Q4 net sales of $1.51 billion, up 6.2% year over year. However, foreign currency headwinds made things look much worse than they were, as net sales grew 11.9% adjusted for change in exchange rates. Cost inflation siphoned off some of the bottom line, as earnings per share of $0.57 edged down 4.9% compared to $0.60 in the prior-year quarter.
Challenges aside, the stock is still trading near its all-time high and is treading water so far this year. That said, there are a number of catalysts that could lift results and push the stock higher over the coming years.
Monster is in the process of rolling out price increases on certain products across the U.S. and its international markets, which will fuel the company's gross-profit margin. Additionally, a price increase will be instituted across its 24-ounce beverage line beginning next month.
A number of Monster Beverage's brands are gaining market share in international markets, and the company led the energy-drink category in the U.S. -- its largest market -- during the past three months. Furthermore, during the preceding four weeks, the overall energy-drink market expanded, with sales increasing by 15% year over year.
The preponderance of the evidence suggests that Monster Beverage has a long runway for growth ahead, with new products and new markets, as well as market-share gains in existing categories.
Monster Beverage is currently trading for 7 times next year's sales, which is near the low end of its valuation range over the past five years. The combination of growth levers, increasing opportunities, and a reasonable valuation makes Monster Beverage a buy.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon.com, Apple, Monster Beverage, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Apple, Monster Beverage, and Tesla. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
