Almost any way you dice it – it's not pretty!
Over the past one, five and ten year timeframes Coca-Cola Amatil Ltd (ASX: CCL) has underperformed the S&P/ASX 200 (INDEXASX: XJO). In fact to have been a shareholder in CCA and to have outperformed the index, you would have needed to own the stock for about 12 years with meaningful outperformance requiring a holding period of 14 years…like I said – not pretty!
Is it cheap enough?
With the share price currently at $9 investors have the opportunity to purchase the stock at its lowest price in five years – the stock price has provided a negative return of 7% over the past half decade.
Having reported a 19% decline in earnings per share (EPS) before significant items to 23.9 cents per share (cps) for the half year ending June 2014, analysts appear to be expecting more of the same in the second half. The consensus data supplied by Morningstar suggests analysts are expecting EPS to decline year-on-year to 51.3 cps for the full year and the full year dividend to drop to 42 cps.
The positive news
On the positive side, it appears 2014 may represent a bottom for CCA with consensus data showing a rise in EPS and dividends to 53.1 cps and 45 cps respectively in 2015. Importantly, with a new CEO at the helm and a strategy to improve performance, earnings and dividends can reasonably be expected to continue to grow in the coming years.
Based on the current share price this equates to a price-to-earnings ratio in 2015 of 16.9x and a dividend yield of 5%. That doesn't look too far off the mark for a blue-chip stock which would suggest investors may want to give due consideration to the beverage maker at these levels.
