Coca-Cola Amatil Ltd and Domino's Pizza Enterprises Ltd. Is it time to buy?

Both companies understand the importance of innovation, could their latest moves drive sales meaningfully higher?

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At first glance consumers and investors alike might not expect companies producing beer and cider, soft drinks or pizza, to be particularly innovative. However as Coca-Cola Amatil Ltd (ASX: CCL) and Domino's Pizza Enterprises Ltd. (ASX: DMP) have shown on many occasions, both companies are innovative in their approach to product development and market opportunities.

Coca-Cola Amatil is now up and running with its re-entry into the beer and cider market. It has secured agreements to distribute a number of global brands of beer and cider into the Australian market while at the same time backing a new venture – The Australian Beer Company – with Casella Wines.

According to CEO Terry Davis, Australia's beer industry is worth $1 billion in profits. With such an experienced marketing and logistics team, if Coca-Cola can successfully develop a range of beer and cider products which sell well in the Australian market, shareholders could see themselves snatching a significant share of this profit pool at the expense of incumbents.

Meanwhile Domino's has shown its continuing innovative prowess with the launch of a premium range of pizzas, which are described as having restaurant quality ingredients. One of the products is a Wagyu pizza that carries a price tag of $50. It would appear a great move by Domino's to expand its appeal to a broader audience by offering a premium product with a premium price.

As Domino's has previously illustrated with its innovative approach to ordering meals online, consumers are keen for new experiences and simpler solutions.

Valuations

While innovative approaches to growing their respective businesses is a positive for the long-term future outlook of both Coca-Cola and Domino's, the share price performance over the past 12 months makes Coca-Cola look decidedly more interesting from an investment perspective.

Shareholders in Coca-Cola would have been disappointed with the company's share price performance during calendar-year 2013, with the stock sinking around 12.5%, it's currently trading at $12.17. With a financial-year end of December, investors will soon get to analyse the full-year results for 2013.

Looking out to 2014, analysts are forecasting Coca-Cola to earn 74 cents per share (cps) and pay dividends of 63.5 cps. On these forecasts the stock is trading on a price-to-earnings (PE) ratio of 16.4 and a dividend yield of 5.2%.

Over at Domino's, earnings per share (EPS) are forecast to jump from 42 cps in FY 2013 to 52.4 cps in FY 2014. Likewise dividends are expected to grow from 30.1 cps to 37.6 cps. In calendar-year 2013, Domino's share price rallied 52% and today the stock is trading at $16.60.

Based on these forecasts, Domino's trades on a PE of 31.7 and a dividend yield of 2.2%.

Foolish takeaway

Domino's is a great business and has high-growth prospects given its exposure to overseas markets, however after 2013's stellar performance the stock looks priced for perfection. In contrast Coca-Cola had a poor year but is still a high-quality company with a fantastic portfolio of brands. With Coca-Cola's share price languishing, its stock looks reasonably priced and could be worth further investigation by investors.

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

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