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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

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!