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Category: Coca-Cola (KO) vs PepsiCo (PEP)
Date: 13 July 2020 Stock price of Coca-Cola: $45.52 Stock price of PepsiCo: $137.38 Battle of the fizzy drinks makers. We compare the stock price performance of Coca-Cola (KO) and PepsiCo (PEP) over the last couple of years as well as investigate which one of these two drinks makers is poised to provide superior returns to stockholders in the future.
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So if one had to buy one of these non-alcoholic beverage makers stocks now which one is the better buy? Does the stock of Coca-Cola offer more value right now as it decreased by less than what PepsiCo stock did over the last 2 years? Or is there a underlying fundamental reason why Coca-Cola underperformed against its rival PepsiCo?"
More About Coca-Cola
The Coca-Cola Company (NYSE: KO) is a total beverage company, offering over 500 brands in more than 200 countries and territories. In addition to the company’s Coca-Cola brands, our portfolio includes some of the world’s most valuable beverage brands, such as AdeS soy-based beverages, Ayataka green tea, Dasani waters, Del Valle juices and nectars, Fanta, Georgia coffee, Gold Peak teas and coffees, Honest Tea, innocent smoothies and juices, Minute Maid juices, Powerade sports drinks, Simply juices, smartwater, Sprite, vitaminwater and ZICO coconut water. We’re constantly transforming our portfolio, from reducing sugar in our drinks to bringing innovative new products to market. We’re also working to reduce our environmental impact by replenishing water and promoting recycling. With our bottling partners, we employ more than 700,000 people, helping bring economic opportunity to local communities worldwide.
Overview of Coca-Cola's latest earnings report
Overview of Coca-Cola's latest earnings report
- Revenues: $8.601 billion (up from $8.694 billion for the same period of the previous year)
- Revenues decreased by -1% over the last 12 months
- Cost of goods sold: $3.371 billion (up from $3.365 billion for the same period of the previous year)
- Cost of goods sold increased by 0.2% over the last 12 months
- Net earnings: $2.775 billion (up from $1.678 billion for the same period of the previous year)
- Diluted earnings per share: $0.64 (up from $0.39 for the same period of the previous year)
- PE ratio of Coca-Cola: 17.1
- Diluted weighted-average shares outstanding: 4.325 billion (up from 4.306 billion for the same period of the previous year)
- Cash and cash equivalents: $13.561 billion
- Cash and cash equivalents per share: $3.13
- Cash and cash equivalents makes up 6.9% of Coca-Cola's market capital
- Cash and cash equivalents makes up 14.4% of Coca-Cola's total assets
- Cash and cash equivalents per share: $3.13
- Accounts receivable: $4.430 billion
- Accounts receivable makes up 4.71% of Coca-Cola's total assets
- Inventories: $3.558 billion
- Inventories makes up 3.78% of Coca-Cola's total assets
- Goodwill: $16.673 billion
- Essentially the goodwill shows the value of Coca-Cola's brand names.
- Goodwill per Coca-Cola share: $3.85
- We therefore estimate that 8.49% of Coca-Cola's stock price is made up by the value of their brand's
- Goodwill makes 17.73% of of Coca-Cola's total assets
- Goodwill per Coca-Cola share: $3.85
- Essentially the goodwill shows the value of Coca-Cola's brand names.
- Stockholders equity in Coca-Cola: $19.834 billion
- Stockholders equity per share: $4.58
- So Coca-Cola is trading a 9.93 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
- Stockholders equity per share: $4.58
More About PepsiCo (PEP)
In 1965, Donald Kendall, the CEO of Pepsi-Cola, and Herman Lay, the CEO of Frito-Lay, recognized what they called “a marriage made in heaven,” a single company delivering perfectly-salty snacks served alongside the best cola on earth. Their vision led to what quickly became one of the world's leading food and beverage companies: PepsiCo.
For more than 50 years, as tastes, trends and lifestyles have changed, PepsiCo has evolved with them. Our willingness to adapt and grow has transformed our snack and soda company into a collection of global brands including Pepsi and Quaker, Gatorade and Tropicana, Frito-Lay and beyond. Today, PepsiCo is one of the world’s most-respected companies with products sold in more than 200 countries and territories and 22 brands that generate more than $1 billion each in estimated annual retail sales.
PepsiCo is also celebrated for its commitment to doing business the right way, integrating Purpose into our business strategy. In 2019, we adopted a new vision: to Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose. Winning with Purpose is the next chapter in our purpose agenda and conveys our belief that sustainability can be an even greater contributor to our success in the marketplace.
Our company is made up of six divisions: PepsiCo Beverages North America; Frito-Lay North America; Quaker Foods North America; Latin America; Europe Sub-Saharan Africa; and Asia, Middle East and North Africa. Each of these divisions has its own unique history and way of doing business.
PepsiCo Beverages North America (PBNA)
Frito-Lay North America (FLNA)
Quaker Foods North America (QFNA)
Latin America
Europe and Sub-Saharan Africa (ESSA)
Asia, Middle East, North Africa (AMENA)
The roots of PepsiCo Beverages North America (PBNA) go back to 1898, when Caleb Bradham, an entrepreneur from New Bern, North Carolina created Pepsi-Cola and began offering it to his pharmacy customers.
Overview of PepsiCo's latest earnings report
For more than 50 years, as tastes, trends and lifestyles have changed, PepsiCo has evolved with them. Our willingness to adapt and grow has transformed our snack and soda company into a collection of global brands including Pepsi and Quaker, Gatorade and Tropicana, Frito-Lay and beyond. Today, PepsiCo is one of the world’s most-respected companies with products sold in more than 200 countries and territories and 22 brands that generate more than $1 billion each in estimated annual retail sales.
PepsiCo is also celebrated for its commitment to doing business the right way, integrating Purpose into our business strategy. In 2019, we adopted a new vision: to Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose. Winning with Purpose is the next chapter in our purpose agenda and conveys our belief that sustainability can be an even greater contributor to our success in the marketplace.
Our company is made up of six divisions: PepsiCo Beverages North America; Frito-Lay North America; Quaker Foods North America; Latin America; Europe Sub-Saharan Africa; and Asia, Middle East and North Africa. Each of these divisions has its own unique history and way of doing business.
PepsiCo Beverages North America (PBNA)
Frito-Lay North America (FLNA)
Quaker Foods North America (QFNA)
Latin America
Europe and Sub-Saharan Africa (ESSA)
Asia, Middle East, North Africa (AMENA)
The roots of PepsiCo Beverages North America (PBNA) go back to 1898, when Caleb Bradham, an entrepreneur from New Bern, North Carolina created Pepsi-Cola and began offering it to his pharmacy customers.
Overview of PepsiCo's latest earnings report
- Net sales: $15.945 billion (down from $16.449 billion for the same quarter of the previous year)
- Net sales increased by -3.1% over the last 12 months
- Cost of sales: $7.088 billion (down from $7.404 billion for the same quarter of the previous year)
- Cost of sales decreased by -4.3% over the last 12 months
- Net income: $1.646 billion (down from $2.035 billion profit for the same quarter of the previous year)
- Diluted earnings per share: $1.18 (down from $1.44 per share for the same quarter of the previous year)
- PE ratio of PepsiCo: 31.3
- Diluted weighted-average shares outstanding: 1.393 billion (down from 1.409 billion for the same quarter of the previous year)
- Cash and cash equivalents: $8.927 billion
- Cash and cash equivalents per share: $6.40
- Cash and cash equivalents makes up 4.8% of PepsiCo market capital
- Cash and cash equivalents makes up 9.9% of PepsiCo's total assets
- Cash and cash equivalents per share: $6.40
- Accounts receivable: $8.780 billion
- Accounts receivable makes up 9.8% of PepsiCo's total assets
- Inventories: $4.314 billion
- Inventories makes up 4.8% of PepsiCo's total assets
- Goodwill: $17.845 billion
- Goodwill makes up 19.9% of PepsiCo's total assets. We are always nervous about goodwill making up such a large chunk of a company's assets. Basically goodwill is the estimated value of the name and reputation of the brands they hold. So if they were to sell Lays for example the group will attach a value of goodwill to Lays and tell the buyer this is how much goodwill is in the brand name. Such valuations are usually very subjective and its easy to manipulate or overinflate if you want to overstate the value of your company's assets.
- Goodwill amounts to $11.1 a PepsiCo stock
- Stockholders equity of PepsiCo's: $12.587 billion
- Stockholders equity per share for PepsiCo : $9.03
- So PepsiCo is trading at 14.9 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at.
- Stockholders equity per share for PepsiCo : $9.03
Coca-Cola (KO) stock vs PepsiCo (PEP) stock
The image below shows the stock price performance of PepsiCo (PEP) an Coca-Cola over the last 2 years. Both these firms are primarily active in the non -alcoholic beverages sector. While the stock price performance trends are fairly similar, in recent months there seems to have been a slight divergence in the stock performance of these two companies stock. Over the 2 year period the stock of PepsiCo returned 17.55% while the stock of Coca-Cola only returned 0.5% over the same period of time.
So if one had to buy one of these non-alcoholic beverage makers stocks now which one is the better buy? Does the stock of Coca-Cola offer more value right now as it decreased by less than what PepsiCo stock did over the last 2 years? Or is there a underlying fundamental reason why Coca-Cola underperformed against its rival PepsiCo?
One of our key metrics is the Price to Stockholders equity per share ratio. When looking at this we find the following for both stocks:
Based on this metric Coca-Cola offers far more value than PepsiCo. Most firms tend to trade at a ratio of between 2 and 4 times. While both these firms are trading at well above the expected range that most firms tend to trade it, Coca-Cola is trading at a ratio far lower than that of PepsiCo.
Next up lets take a look at the two companies cash position. Cash as percentage of each firm's stock price is up first, then we will take at the percentage each firm's cash makes up of their total assets. Cash per share makes up just over 6.9% of Coca-Cola's stock price while cash makes up 4.8% of PepsiCo's stock price.
Next up lets take a look at the percentage cash on the balance sheet makes up of each group's total assets. Total cash as percentage of total assets is as follows for Coca-Cola and PepsiCo. Cash makes up 14.4% of Coca-Cola's total assets while PepsiCo's cash makes up around 9.9% of their total assets. So it does look like Coca-Cola is better placed to ride out difficult times as is currently being experienced during Covid-19 as their cash as percentage of total assets is greater than that of PepsiCo. So Coca-Cola has a stronger cash position to ride out difficult times.
While both these companies have very strong brands. We do believe Coca-Cola has the far stronger brand name. When looking at the market capital of the two stocks Coca-Cola is worth $196 billion vs PepsiCo's $189 billion. So very similar. From a valuation point of view, when looking at the Price/Stockholders equity per share ratio, Coca-Cola offers more value. Not only that when looking at percentage that their cash makes up of their stock price and of their total assets, Coca-Cola leads the way in these valuation metrics too. Coca-Cola also have a PE ratio that is a lower than that of PepsiCo, with the PE ratios being 17.1 and 31.3 respectively
All things considered if we have to choose between Coca-Cola and PepsiCo stock right now. Coca-Cola (KO) is the Winner by a country mile at this point in time.
- Price/Stockholders equity per share for Coca-Cola: 9.93
- Price/Stockholders equity per share for PepsiCo: 14.9
Based on this metric Coca-Cola offers far more value than PepsiCo. Most firms tend to trade at a ratio of between 2 and 4 times. While both these firms are trading at well above the expected range that most firms tend to trade it, Coca-Cola is trading at a ratio far lower than that of PepsiCo.
Next up lets take a look at the two companies cash position. Cash as percentage of each firm's stock price is up first, then we will take at the percentage each firm's cash makes up of their total assets. Cash per share makes up just over 6.9% of Coca-Cola's stock price while cash makes up 4.8% of PepsiCo's stock price.
Next up lets take a look at the percentage cash on the balance sheet makes up of each group's total assets. Total cash as percentage of total assets is as follows for Coca-Cola and PepsiCo. Cash makes up 14.4% of Coca-Cola's total assets while PepsiCo's cash makes up around 9.9% of their total assets. So it does look like Coca-Cola is better placed to ride out difficult times as is currently being experienced during Covid-19 as their cash as percentage of total assets is greater than that of PepsiCo. So Coca-Cola has a stronger cash position to ride out difficult times.
While both these companies have very strong brands. We do believe Coca-Cola has the far stronger brand name. When looking at the market capital of the two stocks Coca-Cola is worth $196 billion vs PepsiCo's $189 billion. So very similar. From a valuation point of view, when looking at the Price/Stockholders equity per share ratio, Coca-Cola offers more value. Not only that when looking at percentage that their cash makes up of their stock price and of their total assets, Coca-Cola leads the way in these valuation metrics too. Coca-Cola also have a PE ratio that is a lower than that of PepsiCo, with the PE ratios being 17.1 and 31.3 respectively
All things considered if we have to choose between Coca-Cola and PepsiCo stock right now. Coca-Cola (KO) is the Winner by a country mile at this point in time.