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.