I have always been an avid fan of Coca-Cola (NYSE:KO), but reading more in depth into Pepsico, Inc. (NYSE:PEP) I think it is a strong buy. It is in the Beverages - Soft Drinks Industry, and is a consumer good. There are three main reasons that I would like to discuss on why I think that Pepsi is a player to watch. First, fundamentals, second history, and third the good news is circulating.
Pepsico, Inc. common stock is currently trading at $60.95 and has a one year target estimate of $72.08 (18.26% upside potential). This stock is trading lower than its 50-day moving average of $61.89 and its 200-day moving average of $66.09, which means which leaves a lot of room for growth. EPS looks very good and seems to be growing, currently is at 3.93 with a P/E of 15.5x. I love how this stock pays a current dividend yield of 3.30% and KO pays only 2.80%. The current profit margin is 10.12%, with an ROA of 8.91% and an ROE of 28.63%. The current revenue from its income statement is 62.43B and 17.60% quarterly earnings growth yoy. The only thing fundamentally to watch is the debt/equity ratio of 112.11. PEP has 3.34B in cash and 27.32B in total debt.
PEP has not performed as well as KO but has done better than the S&P as shown in the graph below. With strong earnings and its heavy influence in music this may be a stock to watch.
Splits: May 31, 1977 [3:1], May 29, 1986 [3:1], Sep 5, 1990 [3:1], May 29, 1996 [2:1]
Finally, another reason I think that PEP is a strong buy is due in part to the news that has been circulating. Below are articles I found interesting, and that solidify my point:
1.) "Pepsi profit rises 4.1%"
This article shows how in Q3 Pepsi had a rise in profits of a solid 4.1%. Despite its jump in costs, they have raised prices in order to supplement, and seemed to have worked.
2.) "Why Pepsi is a strong buy"
I'm not the only one who thinks so, Michael Brush explains how Pepsi has a visible earnings stream. Not only this when the stock was at $87 Credit Suisse analyst Carlos Laboy has a "BUY" rating on this common stock. Also Pepsi has a great vision outside the U.S. especially in Russia. It has expanded its vision overseas and across product lines in order to boost profits, and it seems to be working.
3.) "Action to take: Buy Pepsico, Inc."
Horacio Marquez stated in this article "Founded in 1898, the company has navigated recessions, the Great Depression, two World Wars, and every crisis that’s touched the United States. And Pepsi came out stronger every time. And with good reason: PepsiCo’s products are consumer non-cyclicals that suffer very little even in the worst economic times." I could not have said it better myself, PEP has a strong history and will continue to thrive. This article shows a buy rating since 2008, and I feel this article is relevant today with the economy looking more and more like it did in 2009.
Overall, I think PEP is a good buy at its current price, and has a good foundation for future growth (not to mention a good dividend payment).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.