Sunday, January 22, 2006

Comparing Coke and Pepsi Stocks

Coca Cola Co. (KO)
* Market capitalization – 95.38 billion
* P/E ratio – 18.49
* Earnings yield – 5.40%
* Dividend yield – 2.80%
* Return on equity – 33.09%
* Major products – Coke, Sprite, Dasani water, Minute-maid juices, Hi-C juices, Powerade, Nestea.

Pepsico (PEP)
* Market capitalization – 95.04 billion
* P/E ratio – 24.76
* Earnings yield – 4.04%
* Dividend yield – 1.80%
* Return on equity – 29.14%
* Major products – Pepsi, Mountain Dew, Sierra Mist, Aquafina, Lipton tea, Tropicana juices.

A few weeks ago Pepsico overtook Coca Cola in terms of market capitalization and became the larger company of the two. Today, Coke’s market capitalization is little bit higher than Pepsi’s.

It is hard to predict which soft-drink maker’s stock will outperform going forward. Maybe the race will be neck to neck or Pepsi will be better off on the strengths of its juice and other “non-pepsi” operations. I say, don’t try to pick here. I would rather invest in both of them; make a “soda index” in the portfolio and make it equal weighted and let it ride. The reason for equal weight in the portfolio is that both Pepsi and Coke are close to each other in terms of market capitalization.


The New Wall Street CEO said...

Interesting comparison of the two. I haven't been following either lately, and was surprised to see that their market caps are almost identical. While I value Coke's soft drink business as higher than that of Pepsi's, Pepsi is much better diversified in my opinion. Pepsi's snack divison has proven to be very valuable. So considering these two points, Coke's more valuable soft drinks, and Pepsi's diversification, it is hard to predict which of the two will fare better in the near term. I feel both provide a safe investment, as both are cash cows and should continue to be for a very long time.

The New Wall Street

Loi Tran said...

Both companies seem like good investments. They both seem to be stalwarts and have been solid performers over the long run.

muckdog said...

I think younger folks are gravitating to coffee rather than soda. I don't think the growth is there for sodas anymore. Schools are banning them. Aging boomers are avoiding sugar.

JLP said...

Don't forget that Pepsico owns Gatorade which is a pretty big-selling product.

Anyway, cool post. That's why I come to this website. I like the way you think about things.


hans van deun said...

Both companies have very large international operations, though. Even if young people in the US are drinking more coffee and less coke, I think the rest of the world still has to catch up on drinking coke and/or pepsi.

Anonymous said...

Ko has the margin advantage. PEP has growth and diversification. Diversifcation can be met elsewhere. Ultimately, international markets will determine the winner. I am young and drink coffee, tea, beer, wine, spirits no soft drinks. I favor SBUX, STZ, etc.

Tim MMF said...

Great comparison. I've never really looked that close at either company.

Hey, this would have been a great submission to the Carnival of Business!