Is Coca-Cola Amatil a buy?

Beverage bottler and marketer Coca-Cola Amatil’s (ASX: CCL) share price is once again at levels that begin to make the stock look interesting. The recent earnings downgrade by management, which coincided with the May Annual General Meeting and was reported by The Motley Fool here, has caused investors to question the future growth potential of the company.

Coca-Cola Amatil has grown earnings-per-share (EPS) at a compound annual growth rate (CAGR) of 10.2% for the last decade. Over the same period, the company has been able to grow dividends per share at a 14.1% CAGR. This is impressive and appealing!

While past history is far from a perfect determinant of the future, Coca-Cola Amatil has managed to create a significant amount of shareholder value above and beyond the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) over a long time period. This shows that the company and its management have certain attributes which could help provide continued outperformance in the future.


Source: Google Finance


Future potential

Management believes it can wring out $30 million to $40 million of efficiency gains from the business over the next three years. The company is also positioning itself to be a major force in the domestic alcoholic beverage market, with a focus on beer and dark spirits. Thankfully perhaps, management is leaving Treasury Wine Estates (ASX: TWE) to the often troubled wine industry.

Foolish takeaway

Most investors would agree that Coca-Cola Amatil is a solid company (8 times interest coverage) with a reasonable growth profile. The stock is currently yielding 4.5% and assuming the dividend rises slightly over the next 12 months, then the forecast yield rises towards an attractive 5%.

The question mark is over its growth rate. With an adjusted trailing price-to-earnings ratio of 16.9 times, today’s share price is a full price to pay for a company that could be destined to grow its future earnings at less than 10% per annum.

In the market for high yielding ASX shares? Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

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

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!