I have not checked these numbers yet, but I do believe in the KO as a very good value buy.
From Seeking Alpha:
Coca-Cola Still Looking Good, Merits 'Strong Buy'
June 20, 2012
by: Takeover Analyst
| about: KO, includes: DPS, PEP
"From shareholder unrest about Chairman & CEO Indra Nooyi's performance to market losses against Coca-Cola (KO), PepsiCo (PEP) has been a disappointment. Regrettably, the stock appears to have more room to fall given past performance. In light of this backdrop, I strongly recommend going long Coca-Cola to benefit from the outperformance. Dr. Pepper (DPS) is a speculative "buy" as it is near its 52-week high.
Source: Internal research. Note: PepsiCo's EPS over the past decade.
PepsiCo has been consistent in growing EPS over the years, but the results have not been strong enough. If you take a logarithmic regression of EPS over the past decade, you extrapolate 2016 EPS to be $5.55. Taking a PE multiple of 17x and multiplying by 17x yields a future stock price of $94.38. Discounting backwards by a low WACC of 8% yields a target price of $64.23 -- below the current valuation. The 3.1% dividend yield is also compromised by the uncomfortable financial position. A quick ratio of 0.8 and debt/equity ratio of 1.2 are unsettling.
Investors would be wise to then go with Coca-Cola, which offers a safe 2.7% dividend yield and is rated close around a "buy" on the Street. This top brand merits a premium to the market given its sustainability and solid consistent growth. EPS is expected to grow 8.2% annually over the next five years. That means a future stock price of $109.44 or a combined average return of 11.7% when factoring in dividend yields."
"...There are additional reasons why those seeking stability should back Coca-Cola. Performance, for example, has been predictable but still better-than-expected. Volatility is roughly half of the broader market. Management has executed time and time again while rightfully pursuing penetration in emerging markets. And, unlike PepsiCo, equity exceeds debt. Accordingly, I rate the stock a "strong buy.""
From Seeking Alpha:
Coca-Cola Still Looking Good, Merits 'Strong Buy'
June 20, 2012
by: Takeover Analyst
| about: KO, includes: DPS, PEP
"From shareholder unrest about Chairman & CEO Indra Nooyi's performance to market losses against Coca-Cola (KO), PepsiCo (PEP) has been a disappointment. Regrettably, the stock appears to have more room to fall given past performance. In light of this backdrop, I strongly recommend going long Coca-Cola to benefit from the outperformance. Dr. Pepper (DPS) is a speculative "buy" as it is near its 52-week high.
Source: Internal research. Note: PepsiCo's EPS over the past decade.
PepsiCo has been consistent in growing EPS over the years, but the results have not been strong enough. If you take a logarithmic regression of EPS over the past decade, you extrapolate 2016 EPS to be $5.55. Taking a PE multiple of 17x and multiplying by 17x yields a future stock price of $94.38. Discounting backwards by a low WACC of 8% yields a target price of $64.23 -- below the current valuation. The 3.1% dividend yield is also compromised by the uncomfortable financial position. A quick ratio of 0.8 and debt/equity ratio of 1.2 are unsettling.
Investors would be wise to then go with Coca-Cola, which offers a safe 2.7% dividend yield and is rated close around a "buy" on the Street. This top brand merits a premium to the market given its sustainability and solid consistent growth. EPS is expected to grow 8.2% annually over the next five years. That means a future stock price of $109.44 or a combined average return of 11.7% when factoring in dividend yields."
"...There are additional reasons why those seeking stability should back Coca-Cola. Performance, for example, has been predictable but still better-than-expected. Volatility is roughly half of the broader market. Management has executed time and time again while rightfully pursuing penetration in emerging markets. And, unlike PepsiCo, equity exceeds debt. Accordingly, I rate the stock a "strong buy.""
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