Monarch currently trades at $84.96 per share and has shown little upside over the past six months, posting a small loss of 3%.
Is now the time to buy Monarch, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Monarch Not Exciting?
We're cautious about Monarch. Here are three reasons why MCRI doesn't excite us and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Monarch’s recent performance shows its demand has slowed as its annualized revenue growth of 4% over the last two years was below its five-year trend. Note that COVID hurt Monarch’s business in 2020 and part of 2021, and it bounced back in a big way thereafter. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Monarch’s revenue to rise by 2%, a slight deceleration versus its 16.8% annualized growth for the past five years. This projection is underwhelming and suggests its products and services will see some demand headwinds.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Monarch historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 14.4%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.
Final Judgment
Monarch isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 8.7× forward EV-to-EBITDA (or $84.96 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. Let us point you toward the Amazon and PayPal of Latin America.
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