Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is The Coca-Cola Company (KO) A Good Stock to Buy?

Page 1 of 2

The Coca-Cola Company (NYSE:KO) is hoping to report better results for the second quarter of 2013 after starting the year off poorly during Q1. According to the company’s 10-Q, revenue was down only slightly but with very little absolute change in costs operating income fell by 4%. That’s hardly a dramatic decline, but with Coca-Cola currently trading at 21 times trailing earnings the valuation is pricing in moderate to high growth in the business. Looking at the company’s geographic segments, there were small declines in sales in North America, the Pacific region, and Europe. The Coca-Cola Company (NYSE:KO) generated about $480 million in cash flow from operations during the quarter, which is roughly the same amount of cash used on capital expenditures; share buybacks were financed with debt issuances. However, CFO was held back by a large increase in working capital.

The Coca-Cola Company (NYSE:KO) is of course a classic defensive stock, with little change in demand for soft drinks through the business cycle. As a result, its beta is 0.3. The dividend yield, at 2.8% at current prices, is likely not high enough for a pure income investor to get involved but certainly serves as a plus for defensive investors. Wall Street analysts project that earnings per share will increase considerably in 2014, but the forward P/E of 17 still looks high to us- so in value terms, particularly with business struggling rather than growing, it doesn’t look like a buy at this time.

hedge funds vs. mutual funds

We track quarterly 13F filings from hundreds of hedge funds and other notable investors as part of our work researching investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year on average (learn more about our small cap strategy). Warren Buffett is known as a fan of The Coca-Cola Company (NYSE:KO), and his Berkshire Hathaway reported a position of 400 million shares in its most recent 13F (though we think it’s safe to day the holding company still owns most of those shares). Find Warren Buffett’s favorite stocks. The Bill and Melinda Gates Foundation Trust disclosed ownership of about 34 million shares (see more stocks the trust owns).

The closest peers for The Coca-Cola Company (NYSE:KO) are PepsiCo, Inc. (NYSE:PEP) and Dr Pepper Snapple Group Inc. (NYSE:DPS). Pepsi’s trailing and forward earnings multiples are identical to those at Coca-Cola, and interestingly its beta and dividend yield match its rival’s as well. In addition, Pepsi has also been somewhat struggling recently: its last quarterly report recorded a very small rise in revenue compared to the first quarter of 2012, with earnings down slightly- this isn’t much different from what we saw at Coca-Cola either. Dr. Pepper Snapple, while it doesn’t share the brand power of these two companies, carries a significant discount in earnings terms, with a trailing P/E of 16.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

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 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!