Monster Beverage Is Splitting Its Stock 2-for-1 on Aug. 11. Here's What a $1,000 Investment Could Be Worth in 5 Years.

Who doesn't emotion a banal split? Energy portion powerhouse Monster Beverage (NASDAQ: MNST) precocious announced a 2-for-1 banal split, the company's sixth since 2005. Shareholders arsenic of July 24 aft the market's adjacent volition person a 100% banal dividend aft the marketplace closes connected Aug. 10. The banal volition statesman trading astatine its split-adjusted terms connected Aug. 11.

Although banal splits don't impact a company's financials, investors emotion them due to the fact that they typically hap erstwhile things person gone well. Indeed, Monster Beverage has been, well, a monster. The banal is up implicit 24,000% since 2005.

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The existent question, though, is what volition the banal bash successful the future? Here's what a $1,000 concern mightiness look similar successful 5 years.

The mathematics down banal splits

Suppose you invested $1,000 successful Monster Beverage astatine $100 per stock earlier the marketplace closed connected July 24, and shares inactive traded astatine that aforesaid terms erstwhile the banal divided took place. Your concern would inactive beryllium worthy $1,000. However, alternatively of 10 shares astatine $100, you'd present person 20 shares worthy $50 each.

Remember that banal splits proportionately impact a company's per-share metrics based connected the alteration successful stock count. So, a banal earning $10 per stock would gain $5 per stock aft a 2-for-1 split, but determination would beryllium doubly arsenic galore shares. Stock splits are simply astir however a institution divides the pastry among investors. The existent size of the pastry doesn't change.

Where could Monster banal beryllium successful 5 years?

Monster Beverage's net maturation and valuation volition straight interaction the stock's returns. Shares are presently trading astatine 45 times the company's trailing-12-month earnings, good supra its 10-year mean P/E ratio of 37. Additionally, analysts expect net to turn by an mean of 13% annually implicit the adjacent 3 to 5 years. That's coagulated growth, but it's astir apt just to telephone the banal overvalued.

I'll presume that Monster grows successful enactment with expert estimates, truthful 13% for the adjacent 5 years. I'll besides usage split-adjusted numbers. As a result, Monster's net would look thing similar this:

Data source: Ycharts. Calculations by author.

Adjusting the stock's existent stock terms of $93.50 for the upcoming 2-for-1 divided would effect successful shares trading astatine $46.75. Now, I'll presume that Monster Beverage is trading astatine its semipermanent mean P/E ratio of 37 by twelvemonth five. That puts the banal astatine $70.30 per stock successful twelvemonth five, astir 50% higher than wherever it is present -- again, connected a split-adjusted basis.