Coca-Cola: buy it, sell it, or keep it?

Well, great companies don't always make good investments. In investing, money is sometimes made not when selling, but when buying. In other words, it is not possible to automatically obtain profits by unnecessarily buying stocks of excellent companies.

So, we dug deep into Coca-Cola to determine if Coca-Cola stock is ready to bring profit today.

Coca-Cola has strong pricing powerTsu

Pricing power is a characteristic of great businesses, and Coca-Cola is fully equipped with it. The company recently announced first-quarter earnings and was driven by a slight decrease in sales volume, exchange headwinds, and improvements in pricing and product mix to compensate for corporate adjustments 13% increaseWhat was the net profit supported by what was done 3% increaseI did it.

Coca-Cola has multiple pricing levers. You only need to increase the price of the product by 1 to 2 pennies at a time. Also, since the purchase price is technically low, it is also possible to secretly raise the price by selling a small amount at a high price per fluid ounce, which appears to be a cost reduction. For example, 12 oz cans and 8 oz cans.

A strong dollar and geopolitical disputes are real headwinds, and could logically explain Coca-Cola's sluggish performance. Instead, the company has been growing consistently, if not always by leaps and bounds. It is precisely because the company has maintained consistency over many generations that it was able to achieve such success.

Coca-Cola's dividend is a major reason to buy stocks. It combines the best of both worlds: a stable initial dividend yield of 3.1% and steady growth characterized by 62 years of continuous dividend increases. Investors who reinvest their dividends and wait patiently are making the most of Coca-Cola shares.

The dividend payout ratio was also strong at 79% compared to cash flow. Since this business mainly manufactures concentrates and syrups and cooperates with an independent partner network for bottling and product distribution, there is no need for large investments.

Over the past 5 years, dividends have increased at an average annual rate of 3.5%, which is a slow, steady, and reliable turtle pace. Analysts expect Coca-Cola's profits to increase by 6% or more each year over the next 3 to 5 years, and shareholders are likely to expect even higher dividend growth in the future.

The only downside to Coca-Cola shares is that investment returns may be damaged by excessive payments. Coca-Cola is consistent, but when it is growing at a pace of mid-single digits, stock prices become extremely important. This is because Coca-Cola cannot quickly surpass the premium it paid for the stock price.

What is the current stock price of Coca ColaApproximately 22 times the expected profit for 2024It has become. Assuming that the company grows profits at the 6% clip rate predicted by analysts, this would exceed the PEG ratio by 3 times. Normally, I like to buy stocks with a PEG ratio of around 1.5 or less.

Some may argue that Coca-Cola's reputation and fundamentals have brought a premium to this stock. That may be natural, but there is no safe margin for these evaluations.

The stock's valuation isn't so high that investors are destined not to profit for years. Therefore, I don't think investors who hold shares should necessarily sell their shares. However, it is difficult to justify buying stocks at this price when new money comes in.

Instead, think of Coca-Cola stocks on hold for the time being. If the stock price falls to a range of 18 to 19 times the expected PER, the stock price will look even more attractive.