Monster Beverage Corp (MNST), Molson Coors Brewing Company (TAP): Who’s Profiting from SXSW?

Finally, PepsiCo, Inc. (NYSE:PEP)’s Doritos sponsorship floundered. Pepsi aggressively pushed a product that seemed out of place and the sponsorship came off as both literally and figuratively cheesy. Dorito’s partnership with Yum! Brands, Inc. (NYSE:YUM)’s Taco Bell also failed to make a good impression: after receiving free Doritos Tacos Locos, one attendee tweeted, “The Taco Bell Doritos taco is bad. But the Cool Ranch Doritos Taco is a hate crime against taste.” Pepsi may have wasted a chunk of money on its SXSW marketing, but it looks like a single misstep and not part of a pattern. First, Doritos Locos Tacos are clearly popular with consumers outside trendsetting SXSW. Second, the blue chip is solidly profitable and has plenty of staying power. As a potential investment, however, Pepsi looks pricey and a little inefficient. The company has a P/E of 19 and a high price-to-free-cash-flow ratio of 55 – in other words, it’s expensive relative to both earnings and the money it has on hand. Its net margin is 9.5% and its return on assets is 8.5%, making it about as efficient as the industry average but less so than competitor The Coca-Cola Company (NYSE:KO). The company continues to reliably grow revenues, but with marketing missteps and mediocre metrics, potential investors should watch efficiency and wait for a pullback.

Most investors do not look at a company’s marketing because it is only one component of the operating expenses line. However, paying attention to a company’s marketing moves is a great way to see how employees handle a company’s cash and image. Furthermore, marketing tells an investor how the company is positioning its products now and what trends it is on top of. In this quick comparison of SXSW companies, Monster Beverage Corp (NASDAQ:MNST) comes out as the surprising winner, with a good sponsorship strategy on the ground and bigger picture efficiency metrics to back it up.

The article Who’s Profiting from SXSW? originally appeared on Fool.com and is written by Calla Hummel.

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