The growth stock of the decade

Believe it or not, this company started out in the 1930’s when Hubert Hansen and his sons started selling fresh, non-pasteurized juices to the film studios and retailers in Southern California.

Headquartered in Corona, CA-today Hansen’s Natural is an $8.3 billion dollar market-cap company, and the third best performing stock over the last ten years. The top performer is a Chinese Internet gaming stock by the name of
and the second best performer is a stock called Newmarket Corp.
a stock that I have recently written about.

Data from Best Stocks Now App

As you can see, the stock has returned an average return of 67.8% per year over the last ten years. This compares with a 0.9% average return for the S&P 500
I wish I would have had the good fortune of sticking a thousand bucks into the stock ten years ago. Back then the shares were trading at a split-adusted price of $0.52 per share (about the price of a can of their soda) and my $1,000 would be worth $176,798 today. Hansen’s gets an overall performance grade of “A” in my proprietary grading system.

Unfortunately, Mr. Hansen and his sons were not around when the company started their energy drinks under new ownership. The company filed for bankruptcy in 1988 and was acquired by California CoPackers Corporation. In 1998, the company moved from Anaheim, California to Corona, California.

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Through a combination of acquisitions and new product launches, the company is now near the top of the Forbes list of the 200 best small companies in America. Yes, the company still produces the fruit juices. Yes, the company still produces natural sodas and smoothies, but it is the energy drinks that have really driven the growth of the business.

I recently watched a motorcycle and a snowmobile set world records by jumping across the harbor near my home. The event was sponsored by Red Bull, and it must have cost a pretty penny to stage it. I watched for weeks as construction workers, engineers, and even divers set up the well constructed runway and launch ramp.

I did a little research on Red Bull and found out that it was created by an Austrian by the name of Dietrick Mateschitz, who is now worth over $5 billion dollars. Darn it, I missed the boat again! Red Bull is not a publicly traded company, however.

It is Monster Energy that has driven the phenomenal growth of Hansen’s over the last ten years. Why do I say this? The company just changed its symbol from HANS to

It seems a little ironic that a so-called natural juice company morphed into a Monster Energy company, but such is the nature of capitalism. When I see teenagers forking over several dollars for a can of sugar-water laced with a bunch of caffeine, I can see why the company has grown its earnings from $.021 per share to $3.71 per share since 2004.

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During that same period of time, the stock has gone from $1.00 per share to a current reading of just over $95.00 per share. What about buying the stock today? Is the ride over? How much has competition from all sorts of other energy products hurt Hansens? For an answer to this question, we need to do a current valuation on the shares.

The current consensus earnings estimate for next year is $3.71 per share. The company is expected to continue to grow its earnings at a rate of 14.5% per year over the next five years. This would put earnings at $6.38 five years from now. Now, what multiple does the company deserve on those earnings?

The company currently trades at 33 times earnings. Over the last four quarters, the PE ratio of the shares has ranged between 19-32. Over the last five years, the average PE ratio has been close to 30. I am using a very generous PE ratio of 26 to compute a five-year target price of $165.79 per share.

This gives the company just over 70% upside potential over the next five years. That is, if it can indeed maintain this generous PE ratio, and be able to make their earnings forecasts. I like to buy stocks that have 80-100% or more upside potential. Hansen’s currently falls a bit short of that and currently earns a C+ value grade.

See also

I would not be a buyer of the stock today. I would prefer to buy the stock in the mid-eighties, if it gets there again. I am not selling the stock either. The stock has been very good to me over the years. Can anyone have too much energy? But, at what price? Wait for a pullback.

DISCLOSURE: Bill Gunderson am long HANS.

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