Has Monster Beverage Corporation (NASDAQ:MNST) Got Enough Cash To Cover Its Short-Term Obligations?
Investors looking for stocks with high market liquidity and zero debt on the balance sheet should consider Monster Beverage Corporation (NASDAQ:MNST). With a market valuation of $36.11B, MNST is a safe haven in times of market uncertainty due to its strong balance sheet. In times of low liquidity in the market, these firms won’t be left high and dry. They are also relatively unaffected by increases in interest rates. Assessing the most recent data for MNST, I will take you through the key ratios to measure financial health, in particular, its solvency and liquidity. Check out our latest analysis for Monster Beverage
Does MNST face the risk of succumbing to its debt-load?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. As a rule of thumb, a financially healthy large-cap should have a ratio less than 40%. The good news for investors is that Monster Beverage has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with MNST, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can MNST pay its short-term liabilities?
Since Monster Beverage doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. With current liabilities at $470.6M, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 3.04x. Though, anything above 3x is considered high and could mean that MNST has too much idle capital in low-earning investments.
Next Steps:
MNST has no debt as well as ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and its investors, though, some level of debt could also boost earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure MNST has company-specific issues impacting its capital structure decisions. I recommend you continue to research Monster Beverage to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for MNST’s future growth? Take a look at our free research report of analyst consensus for MNST’s outlook.
2. Valuation: What is MNST worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MNST is currently mispriced by the market.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
