The Coca-Cola Company (KO), PepsiCo, Inc. (PEP) & Why This Trio of Numbers Suggest Problems Bubbling Up

When a well loved company begins to run into trouble, it is nearly impossible to convince some investors that the stock could have problems. I don’t believe in shorting stocks, or trying to time the market, but I do know when a stock looks overvalued. I know to some it will seem like heresy for me to suggest this stock is overpriced, but that’s the way The Coca-Cola Company (NYSE:KO) looks at current levels.

The Coca-Cola Company (NYSE:KO)

Where opportunity meets reality
I’ve been hearing for my 20 years of investing how Coca-Cola has so much opportunity to grow on a global basis. The company makes over 500 products, but simple logic tells me that at some point, even The Coca-Cola Company (NYSE:KO)’s growth rate has to slow down.

Just as an example, pretty much everyone knows Coca-Cola products in the U.S. It’s hard to find a store or restaurant that doesn’t carry either The Coca-Cola Company (NYSE:KO) or PepsiCo, Inc. (NYSE:PEP) products. Coca-Cola also makes money helping Dr Pepper Snapple Group Inc. (NYSE:DPS). Dr Pepper Snapple Group Inc. (NYSE:DPS) bottle some of their products. In addition, Coca-Cola is the bottler of choice for Monster Beverage Corp (NASDAQ:MNST).

While the domestic market may be saturated, the international market is a different ballgame, or at least so we have been told. The problem is, simple math says Coca-Cola can’t offer the same opportunity today as it did 20 years ago. I’ll give you an example. Twenty years ago, I was in college and working part-time. I drank The Coca-Cola Company (NYSE:KO) beverages like they were going out of style. Since I don’t drink coffee, I would wake up with a Coke. I would get a Sprite from the vending machine at school. Then because I was a dreaded telemarketer for four to six hours at night, I would consume another two to four cans of Coke or Sprite.

Over the years I realized that drinking all of those empty calories wasn’t good for me, and I switched to bottled water. I loved Dasani, so investors in Coca-Cola would say who cares? However, buying and storing a bunch of bottled water was a pain. Today my family uses an under the sink water filter. I still have a Diet Coke maybe once a day, but nothing like I used to drink.

I was a hard-core The Coca-Cola Company (NYSE:KO) customer and my consumption of their products has been cut by at least 75% in the last 20 years. While there are international customers that are just discovering Coca-Cola, this cycle is likely to repeat itself over and over, until Coca-Cola sees weaker results. What many investors may not realize is, the company is already reporting results that are less than ideal.