Coca-Cola (NYSE:KO), a renowned global beverage giant, really needs no introduction. In recent years, the company has diversified beyond cola into dairy, plant-based drinks, and more. It recently added new flavors to its VitaminWater line and welcomed Thomas S. Gayner, CEO of Markel Group, as a director, along with Henrique Braun as Corporate Senior Vice President. These are significant developments for KO stock.
I believe KO stock represents a buying opportunity at current levels, particularly considering the stock’s 7% drop in September. It’s down 13% for the year, and trades under $55 per share. With a historically low price-earnings ratio of 22 times and a 3.35% yield via a 46-cent quarterly dividend, investors should consider investing in KO while it’s discounted.
Here’s why you should load up on KO stock now.
What Makes It a Buy
Coca-Cola’s stock commands a premium valuation relative to its peers due to its resilient, enduring business. It consistently serves major restaurant chains and boasts recession-resistant brands. Additionally, impressive organic revenue growth of 11% year-over-year in Q2, along with non-GAAP earnings per share growth, contributes to the stock’s appeal.
Coca-Cola anticipates a strong second half of 2023 with upgraded guidance, expecting 8% to 9% organic revenue growth and 5% to 6% non-GAAP EPS growth for the year. With a P/E ratio just below 22, the stock offers an attractive valuation for a company known for consistent growth and sound financial practices.
The Numbers Add Up
The company maintains a strong balance sheet with net debt around two times its annual net income, making it more robust than other dividend-yielding stocks. In challenging economic times, its balance sheet remains resilient, and the company could potentially clear its debt within two years if necessary.
Additionally, Coca-Cola boasts a strong dividend yield of 3.4%, well above the S&P 500 average. This reliable dividend, increased annually for 61 years, helps mitigate stock price volatility. With a robust balance sheet, Coca-Cola is well-positioned to sustain its dividend growth, making it an appealing long-term investment.
What Now
Coca-Cola stock is appealing, offering steady sales growth and market share gains in the beverage industry. While it may not reach the 15% growth of 2022, its strong earnings and profits ensure rising returns and competitive strength.
Coca-Cola’s discounted valuation and solid long-term potential make it an attractive investment. With shares trading at 5.4-times annual revenue, even amid potential short-term growth challenges, the stock remains appealing.
On the date of publication, Chris MacDonald has a LONG position in KO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
