Everyone’s heard about stocks that have produced phenomenal returns and made investors millionaires. These include companies like Amazon (AMZN -1.34%) and Apple (AAPL +0.23%).
Typically, making a lot of money from your stock investments takes time. After all, these companies didn’t turn a $10,000 investment into $1 million overnight. That’s 100 times your initial investment.
Monster Beverage (MNST +0.61%) has done well for shareholders over the last few years. If you invest $10,000 today, does it have the potential to turn that into $1 million?
Image source: Getty Images.
Past returns
Over the past 10 years, through Sept. 18, Monster Beverage’s shares gained 263%. The company hasn’t paid dividends, so that’s the return that shareholders received. If you’d invested $10,000, your shares would be worth over $36,000 today.
Of course, that’s far short of $1 million. But that’s only over 10 years. Monster Beverage’s stock generated a 14% annualized return. Earning that rate of return over 25 years results in a value of over $250,000.
By comparison, you’d have been better off investing in a low-cost S&P 500 (^GSPC +0.00%) index fund. The index returned 326% over a decade, including dividends. If you’d invested $10,000, you’d have nearly $43,000 today.
Required future return
A 14% annualized return is pretty good, but it’s still insufficient to make you a millionaire in 25 years. What rate of return would you need?
Monster Beverage’s shares would have to return over 20% annually over a quarter of a century. That’s a significant increase from the stock’s previous return.
That would also require the stock to return nearly double the S&P 500’s historical rate. Over 25 years, the index returned 10.4% annually.
Can Monster Beverage make you a millionaire?
Monster Beverage has been a growth stock, and the last five years have been rewarding for shareholders. During this period, the stock gained 91.3%, edging out the S&P 500’s 90.6%.
Today’s Change
(0.61%) $0.27
Current Price
$44.27
Key Data Points
Market Cap
Day’s Range
$44.13 – $44.85
52wk Range
$31.50 – $50.17
Volume
8M
Avg Vol
10.9M
Gross Margin
55.55%
Monster Beverage’s energy drinks have struck a chord with consumers. Its second-quarter sales grew 17.9% year over year to $2.5 billion, adjusted for foreign currency translation. Its major business, Monster Energy drinks, drove this growth, with the division’s sales growing 19.3% year over year to $2.3 billion.
However, Monster Energy faces competition. Continued sales growth requires the company to stay a step ahead. Additionally, it’s uncertain whether energy drinks have proven staying power, or if consumer tastes will shift to something else.
Hence, while the stock has done well lately, I wouldn’t count on growth accelerating and the share price gain providing the necessary return to make your $10,000 investment turn into $1 million.
