Monsters in the Making? U.S. Stocks with Valuations Way Ahead of Revenue

SmallCapPower | February 5, 2016: Last Friday, Citron Research (the infamous independent research firm led by Andrew Left, which almost single handedly destroyed Valeant’s share price) published yet another short-selling article, but this time on Monster Beverage (NASDAQ: MNST) with a target of $80 (40% implied downside from the $135 close). He argued that the stock’s valuation has gotten out of hand due in part to the hype created on Wall Street of a Coca-Cola-type investment, paired with teasing investors about a potential China entrance. Overall, he stated “over the past five years MNST’s market valuation is up 500%, while its revenues are up 90%,” which speaks volume. With that in mind, the stocks on our list today display large disconnects between slumping revenue figures and surging share-price gains.

Domino’s Pizza Inc. (NYSE: DPZ) – $114.00
Restaurants & Bars

Domino’s Pizza, Inc. is a pizza retail chain that operates pizza stores at 11,900 locations in over 80 markets. The Company operates in three business segments: domestic stores, international franchise and supply chain. Its basic menu features pizza products in various sizes and crust types. Its store also offers oven-baked sandwiches, pasta, boneless chicken and wings, bread side items, desserts and Coca-Cola soft drink products.

• Market Cap: $6,218,856,253
• Revenue (LTM): $2,118,295,000
• Price Increase (5 years): 589%
• Revenue Increase (5 years): 30%

Constellation Brands Inc. (NYSE: STZ) – $146.02
Distillers & Wineries

Constellation Brands, Inc. is an international beverage alcohol company, which has operating segments that include Beer, Wine and Spirits and Corporate Operations and Other. The Company’s wine portfolio is complemented by select spirits brands and other select beverage alcohol products. It is a multi-category supplier (beer, wine and spirits) of beverage alcohol in the United States. The Company’s customers include wholesale distributors, retailers, on premise locations and government alcohol beverage control agencies.

• Market Cap: $29,979,644,936
• Revenue (LTM): $6,361,400,000
• Price Increase (5 years): 661%
• Revenue Increase (5 years): 132%

Rite Aid Corp. (NYSE: RAD) – $7.85
Drug Retailers,

Rite Aid Corporation is a retail drugstore chain that sells prescription drugs and a range of other merchandise, which are referred to as front-end products. The Company’s drugstores’ primary business is pharmacy services. It operates approximately 4,570 stores in 31 states across the country and in the District of Columbia. Its front-end products include over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, food and beverages, greeting cards, seasonal merchandise and various other every day and convenience products.

• Market Cap: $8,214,737,086
• Revenue (LTM): $29,314,450,000
• Price Increase (5 years): 528%
• Revenue Increase (5 years): 15%

Visa Inc. (NYSE: V) – $73.68
Business Support Services

Visa Inc. is a payments technology company that is engaged in operating a processing network, VisaNet, which facilitates authorization, clearing and settlement of payment transactions across the world. The Company provides its services to consumers, businesses, financial institutions and governments in more than 200 countries and territories for electronic payments.

• Market Cap: $162,450,061,478
• Revenue (LTM): $14,063,000,000
• Price Increase (5 years): 308%
• Revenue Increase (5 years): -14%

Alaska Air Group Inc. (NYSE: ALK) – $68.91
Airlines

Alaska Air Group, Inc. is a holding company of Alaska Airlines Inc. (Alaska) and Horizon Air Industries Inc. (Horizon). The Company operates Alaska Airlines and Horizon Air airlines, which together with its partner regional airlines serve approximately 100 cities through a network in Alaska, the Lower 48, Hawaii, Canada and Mexico. The Company operates in three segments: Alaska Mainline, Alaska Regional and Horizon.

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