Although it's hard to identify an immediate catalyst which could cause a significant jump in the share price of Coca-Cola Amatil Ltd (ASX: CCL), long-term investors may be content to buy in at multi-year lows and patiently wait.
Here are a few reasons to view the current price as an appealing entry point…
Yield – According to data provided by Morningstar, Coca-Cola Amatil (CCA) is trading on a FY 2016 forecast yield of 5% which is above its Consumer Staples sector peers of 4.9% and in line with the S&P/ASX 300 (Index: XKO). It must be noted that CCA's dividend is only partially franked however.
Earnings growth – In FY 2016, based on analyst consensus data, CCA is forecast to achieve earnings per share (EPS) growth of 3.4% after experiencing two years of earnings declines. This growth rate is expected to lag both its peers and the wider index.
Price-to-earnings ratio – Based on the above EPS forecast CCA is trading on a forward PE of 17x. This is above both the forecast PE for the Consumer Staples sector of 15.9 and the S&P/ASX 300 multiple of 15.2.
Buy, Hold, or Sell
After a difficult period, Coca-Cola Amatil may be set for a return to more normal levels of growth. Investors who consider the company to be an above average blue-chip will quite likely be comfortable paying an above market multiple for the stock and waiting for normalised earnings growth to flow through to a higher share price.
