Financial Report for Monster Energy & Starbucks

Coffee
Report By:
Jorge Echavarria
Ethan Vanden Bosch
KJ Guard
Jason Hassell

We have been analyzing the financial statements of Monster

Energy (MNST) and Starbucks (SBUX) from the years 2010-2014. The

goal(s) of our analysis is to be able to analyze the trends of the

companies and to determine with which company investors should
invest their money. Both of these companies provide people with a
pick me up boost of caffeine as well as other novelties. Monster
Beverage Corporation has over 5,000 employees and Starbucks has
over 191,000, so as we can see, Starbucks is clearly the bigger
company. When investing however, bigger isnt always better. The
following report will show evidence of profitability, financial trends and
ratios, benchmarks comparisons with other companies from the same
industry and financial graphs pulled from the financial statements of
each company.
To best analyze and compare these two companies, we would like
to organize this report into the 5 key financial ratios listed in Financial
Management: Core Concepts, by: Raymond M. Brooks. These 5 ratios
are. 1. Liquidity Ratios 2. Solvency Ratios 3. Asset Management Ratios
4. Profitability Ratios and 5. Market Value Ratios.
Liquidity Ratios: Can the company meet its obligations over the
short term?
To analyze the liquidity of both these companies we used a
current ratio which is the simplest form to calculate liquidity for any
given company. Liquidity is the ease a company has to fulfill its
financial obligations through its liquid assets. In order to find this you
divide the total current assets against the total current liabilities.

As we see in this graph the liquidity for Monster goes from 4.9
down to 2.8 and back up to 4.7 again throughout the five years of
being analyzed. Starbucks on the other hand goes from 1.5 to 1.0 then
back up to 1.3. We can easily see that the liquidity ratio of both started
high and then dropped in 2012 (for Monster) and in 2013 (for
Starbucks). 2012 is when the liquidity of both companies was at its
closest. Monster has a much higher current ratio than Starbucks, and
this ratio is not at a good level for creating value for the stockholders.
A ratio of 1.0 means that company can exactly cover short term
liabilities with their liquid short term assets. The ratios above 2 are
considered to be bad because they do not create value as short term
assets. Starbucks has better liquidity maintaining the current ratio in
between 1.0 and 2.0, in 2011 and 2012 Starbucks maintained a great
ratio at 1.8 and 1.9. Starbucks has much better liquidity in comparison
to Monster.

Solvency Ratios: Can the company meet its obligations over the long
term?
Asset Management Ratios: How efficiently is the company
managing its assets to generate sales?
Profitability Ratios: How well has the company performed overall?
In order to more fully understand our position, one must identify
certain key performance indicators located on the balance sheet and
income statement from Monster Energy and Starbucks. We will first
analyze the two companies earnings per share ratios. ROE is a key
ratio for the companys owners. It indicates how much profit the
company generates for the owners based on their ownership claim.
(Brooks, p.435)

In 2013 Starbucks pulled out early from a distribution deal with Kraft
foods, costing the company over 2.7 billion dollars, lowering the Return
on Equity. As you can see from the graph above, 2010 through 2011
both companies had an ROE around 30%. As of 2014, Starbucks is on
the rise at nearly 40% and Monster is leveling back out at 30%.
Although it seems like the return is best for Starbucks, reports show
that as of June 2015 Monster Beverage Corporation has come to terms
with a distribution contract the Coca-Cola Company guarantying more
money for stockholders.
After analyzing the ROE of the two companies, we would now like
to turn to their Net Profit Margin. Net Profit Margin is the percentage
of revenue remaining after all operating expenses, interest, taxes and
preferred stock dividends (but not common stock dividends) have been
deducted from a companys total revenue. (InvestingAnswers.com)

As we can see from Net profit margin, Monster Energy has a much
higher Net Profit Percentage on average. Monster Profits nearly 19
cents from every sales dollar, while Starbucks profits only 12 cents,
and even dropping down to less than 1 cent per sales dollar.
Market Value Ratios: How does the market (investors) view the
companys financial prospects?