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Coca-Cola and Pepsico are both basic products companies.
Although Coca-Cola and Pepsico make drinks, we have a much more diverse business.
Coca-Cola seems much more attractive to Wall Street today, but that does not necessarily mean that you should buy it.
Drinks Coca-Cola(Nyse: ko) And Pepsico(Nasdaq: PEP) have a lot in common. Some investors could consider them as interchangeable investments, but they are not.
At the moment, one is much more attractive than the other, which is why you may want to be selective if you are looking to buy one of these actions at the moment.
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Coca-Cola and Pepsico are both Basic producers. These types of companies generally manufacture products that are consumed regularly, which means repeated purchases at frequent intervals.
And the costs of consumer’s basic products are generally quite low, so consumers generally do not care about costs and, rather, focus more on their personal preferences. In addition, most of the segment products enter the arena of necessity, so that they must be purchased, whatever the environment of the market or the economic backdrop.
This is why basic consumption stocks like Coca-Cola and Pepsico are considered to be defensive investments. Coca-Cola is a pure game with drinks. Pepsico has drinks, but it also makes savory snacks (Froto-Lay) and packaged products (Quaker Oat). In this way, Pepsico is a much more diverse business.
That said, Coca-Cola and Pepsico have a global footprint and a powerful distribution, marketing and R&D tools at their disposal. Thus, even if they are not interchangeable, they are very similar in certain important ways.
One of the most important ways for which Coca-Cola and Pepsico are similar are in their reliable long-term performance. This is better highlighted by the status of each company as a king of dividends. This group of highly elite companies has increased its dividends each year for at least 50 consecutive years. This does not happen by chance – it can only happen if a company has a solid commercial model which is well executed in both stages and bad times.
Interestingly, the dividend is the place where the biggest difference between these two basic consumer giants begins to appear. The average stock of consumer staples has a yield of 2.5%, the yield of Coca-Cola dividends is 2.8%and the pepsico yield is approximately 4%. Obviously, Pepsico is the most attractive income option.
However, there is another small wrinkle here. Coca-Cola’s yield is close to the lowest point in the last decade. Pepsico’s yield is close to the highest point in its entire history. This suggests that the Coca-Cola stock is actually expensive at the moment, while the stock of pepsico is on sale.
Traditional evaluation measures support this vision, with price / price / price ratios of the value of Coca-Cola’s value / book, all superior to their five-year averages and their current P / S ratios, P / E and P / BV of Pepsico, all below their five years. Investors focused on value and income will both find Pepsico more attractive than Coca-Cola at the moment.
Nothing happens in the void at Wall Street. Pepsico’s evaluation is attractive at the moment because it does not work as well as Coca-Cola as a business. And the diversification of Pepsico is part of the problem, because its large and important activity of important snacks deals with the opposite winds of demand.
In fact, the company reduced its projections in 2025 of the whole year when it published results in the first quarter. If history is a guide, however, management will find a way to get back on the right track. He notably worked on the acquisition front to call on new brands via BOLT-on offers which are more in line with consumer tastes today.
There is nothing intrinsically bad with Coca-Cola as an investment. And, to be fair, traditional evaluation measures refer to a just -to -high price, not to an extremely high assessment. It would not be exactly a big mistake to buy the drinks giant. But Pepsico will probably be the most attractive of both for most income investors and those who have a value of any kind.
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