Invest In PepsiCo, Inc. (PEP) and The Coca-Cola Company (KO)?

Opportunity

So, what does a company like Novo Nordisk have to offer investors? In short, a lot. Revenue has increased annually for over a decade while earnings per share dropped only in 2007. The company offers a dividend yield of 1.3%, nearly triple that of the industry average. Its stock offers investors quite the bargain, as its free cash flow yield is a solid 22%. Gross margins are 82.1%. Not bad for a company trying to right a wrong.

If trends continue in the way they are headed, the Center for Disease Control and Prevention expects one-in-three Americans to have diabetes by 2050. While I would never wish diabetes on anyone, imagine what a company like Novo Nordisk would do with that many more people available in its market. Often times, a company will appear very cheap because of a falling stock. This is not the case with Novo Nordisk.


PepsiCo, Inc. (PEP), The Coca-Cola Company (KO): One Soda a Day Keeps Your Health Away

NVO data by YCharts

Invest in Coca-Cola and PepsiCo?

Although The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) may not be as cheap, or appear to have as great of an opportunity as Novo Nordisk, they should appeal to some investors. More than half of PepsiCo’s revenue, and more than 60% of Coca-Cola’s revenue, are derived from overseas sales. America’s numbers have dropped off, while foreign numbers continue to rise. Foreign markets are driven largely by China, Russia, Latin America, and Africa.

Also, these companies are starting to focus more on healthier products to market to their more health-conscious consumers. For instance, The Coca-Cola Company (NYSE:KO) now sells Dasani water, Powerade, Honest Tea, and Simply Orange. Both companies are trying to figure out a way to make a soft-drink beverage that tastes the same, while eliminating the calories.

The Foolish bottom line…

While I wouldn’t expect The Coca-Cola Company (NYSE:KO) or PepsiCo, Inc. (NYSE:PEP) to struggle, only one of these three companies has the highest FCF yield, the most consistent revenue and earnings- per-share increases, the highest gross margins, and the best-performing stock. Whichever company can increase sales in healthier products will likely make it a better “buy.”

Dividend yield is about the only thing that Coca-Cola and PepsiCo have bragging rights to. Maybe soft drinks, fast food, and sedentary lifestyles are what made Novo Nordisk the world’s most “sustainable company” on Business Magazine’s 2012 list. These products/lifestyles all lead to obesity, which often leads to diabetes, which should lead to greater investment opportunities for companies operating in the field of diabetics, such as Novo Nordisk.

The article One Soda a Day Keeps Your Health Away originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!