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The iconic red can. The refreshing fizz. The familiar taste that evokes childhood memories and quenches thirst on a hot day. Coca-Cola (NYSE: KO) is a brand woven into the fabric of American life, and its stock has been a mainstay in many portfolios for decades.
But with the stock recently lagging behind the S&P 500 index, some investors might be wondering: Has the fizz gone flat? Is it too late to buy Coca-Cola stock? Is the beverage industry too stodgy to serve up wealth-building investments nowadays?
Hold on just a second before you pour your Coca-Cola investing thesis down the drain. It's true that Coca-Cola hasn't exactly been a rocket ship lately, gaining only 1% in a year compared to the S&P 500's 31% surge, but there's still plenty to like about this beverage behemoth.
Coke by the numbers
First off, let's talk valuation. Coca-Cola is currently trading at a reasonable 25 times earnings and 6 times sales. Not exactly a bargain-basement price, but certainly not an outrageous ask for a company with such a dominant market position and consistent performance.
Speaking of performance, let's not forget that Coca-Cola has been steadily growing its sales at a 6.5% compound annual rate over the past five years. That's not exactly explosive, but it's certainly nothing to sneeze at for a company of its size and maturity.
And it's not like Coca-Cola is resting on its laurels, either. The company is actively exploring new avenues for growth, including leveraging the power of artificial intelligence (AI) for targeted promotions and marketing campaigns. Coke teamed up with ChatGPT maker OpenAI to launch a brand-boosting campaign named "Create Real Magic" last spring. By the end of summer, it had introduced several limited-edition flavors of Coca-Cola and Sprite, relying on AI to suggest interesting flavor combinations.
These short-lived efforts didn't exactly change the game, but they showcased Coca-Cola's willingness to tap into soaring market trends.
The soda titan is also dipping its toes into the booming energy drink market through a strategic partnership with Monster Beverage (NASDAQ: MNST). It's a lucrative partnership in which Monster has managed its own energy drinks alongside Coca-Cola's energy names led by the Full Throttle and NOS brands since 2014, all distributed by Coke's world-class global network of bottling partners. Coca-Cola also owns 19.6% of Monster's stock, giving the soft drink giant a significant financial interest in the energy drink specialist's business growth.