Comparing Global Beverage Giants from a Value Investing Perspective: Financial Ratios and Profitability Forecasts for Coca-Cola, PepsiCo, Monster Beverage, and Keurig Dr Pepper

Abstract

This report compares four of the most globally dominant players in the beverage industry from a value investment standpoint. Reviewing underlying core financial ratios, profitability characteristics, and the effects of assumptions on five-year returns from a base case scenario using primarily the forecast EPS growth rate and P/E ratio over the next 5 years and making different investment recommendations based on various types of investors. The results indicated Monster was superior in terms of EPS growth, net margin, asset efficiency, and exhibited a comparatively reasonable PEG for long-term return potential. Coca-Cola, on the other hand, had the best earnings quality and stability, more in line with a defensive type of allocation profile. Keurig Dr Pepper fell in the middle of the pack with relatively weak efficiency metrics, while Pepsi's muted growth and valuation were comparatively less justified by its underlying fundamentals. Caveats of this analysis include the cross-sectional comparison of the firms being on different scales, a primarily quantitative analysis, and only one base case scenario being used. Forgoing forward, this can be extended to include non-financial measures (brand equity, pricing power, distribution, and regulatory tail risks) as well as multiple scenario simulations.