Coca-Cola Amatil Ltd (ASX: CCL) is one of the most recognisable and well researched companies on the ASX, yet investors don’t seem to be willing to invest for the long term.
As the bottler of Coca-Cola and associated beverages in the Asia Pacific region, Coca-Cola Amatil has been a portfolio mainstay for conservative investors over many years. This can be at least partially attributed to the great Warren Buffett’s love of the company’s parent and 29% shareholder The Coca Cola Company.
Coca-Cola Amatil was terrifically consistent between 2006 and 2012 but broker interest has peaked during the last 12 months after the company reported a fall in profit and a marked shift in local conditions. Indeed my data provider shows no less than 15 analysts’ estimates of Coca-Cola Amatil’s future earnings, the same as Commonwealth Bank of Australia (ASX: CBA).
Coca-Cola Amatil reported a fall in local margins, a massive restructure of operations, and sizeable drop in profit which has forced the share price to fall 30% this year to new five-year lows. This appears to have enticed more brokers to look at the company as a value play.
Consider the following analyst estimates gathered from my data provider;
- The mean estimate of fair value is $9.05, 3% above the current price
- Revenue is predicted to be flat at $5.1 billion
- Normalised earnings per share are estimated at 52 cents, 22% lower than last year
- Dividend per share is estimated to be 46 cents for the 2014 financial year
At the current price of around $8.75, Coca-Cola Amatil is trading on a forward (end of 2014) price to earnings ratio of 16.8 and a 2014 dividend yield of 5.3%, 75% franked, or 7% gross. In the 2015 financial year these numbers are estimated to change to 15.9 and 7.2% respectively. Coca-Cola Amatil’s long-term average PE ratio is around 17.
Are you missing out?
So the question is, with expectations that Coca-Cola’s management team can turn around the company’s trouble points, are you positioned to benefit from the big 7% yield?
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie
- 3 hot shares to benefit from rising property prices – August 14, 2017 8:17am
- Were you holding these 5 big share market fallers last week? – August 14, 2017 8:10am
- Integrated Research Limited shares surge 19% in 3 weeks, what happened? – July 10, 2017 10:34am