3 reasons to stock up on Coca-Cola Amatil Ltd

Coca-Cola Amatil Ltd (ASX:CCL) may have lost its fizz in the past decade but its future prospects are looking up.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The share price of leading beverage company Coca-Cola Amatil Ltd (ASX: CCL) certainly appears to have lost its fizz in the past decade. Over the last 12 months the stock has fallen 25%, while over the past five years it's down 7%. The ten-year return isn't all that exciting either with the share price having gained 29%, which is significantly behind the 55% return from the S&P/ASX 200 Index (INDEXASX: XJO).

Despite having the rights to one of the world's greatest brands throughout Australia, New Zealand, Fiji, PNG and Indonesia, Coca-Cola Amatil (CCA) is obviously struggling to convert this asset into meaningful shareholder returns.

While the company is certainly not a 'mini-me' version of its US-based parent The Coca-Cola Company, there are a number of reasons to be positive about its long-term future prospects.

1) New CEO Alison Watkins is wide awake to the challenges facing the group with pressures coming from a number of fronts. This is seeing her make tough decisions and implementing a range of changes to the company.

2) While there is little denying the fact that CCA will continue to face near-term headwinds – management has provided guidance that earnings for FY 2014 (the group has a December year-end) will be materially below FY 2013 – if it is all reflected in the share price then a case for buying the stock can still be made.

According to data from Morningstar, the analysts' consensus forecast is for earnings per share of 51.3 cents per share (cps) in FY 2014 and 53.1 cps in FY 2015. This equates to an FY 2014 price-to-earnings ratio of 17.6x – arguably the market has this stock priced correctly.

3) The consensus data is also forecasting a dividend of 42 cps in FY 2014, rising to 45 cps in FY 2015. Looking forward to FY 2015 this implies a yield of 5% which is definitely enticing.

A good entry point

Taking a long-term contrarian view point, the best time to buy high quality, market-leading stocks is when they are out of favour. With the stock price trading down at what looks to be about fair value this could be a great opportunity for long-term, conservative investors to add a top blue-chip stock to their portfolio.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »