Hidden Beverage Stock: Dr Pepper Snapple Group Long-term Investment Potential:
• Beverage stocks are typically strong for long-term investment strategies.
• Relatively Crisis-resistant, with a steady increase in profits.
• Offer solid dividends.
Revenue Breakdown (Approximate values):
• 35% of revenue comes from coffee.
• 65% of revenue comes from the beverage business (e.g., sodas, soft drinks).
Brands:
• Major brands include Dr Pepper, Schweppes, 7up, etc.
Geographical Focus:
• Primarily active in the USA, with 87.5% of revenue generated from the U.S.
• The U.S. is one of the most competitive and consumer-friendly markets.
Financial Metrics (2018-2023): KDP (left) and beverage peers (right)
• Net Sales CAGR: 6% / Beverage Peers: 7%
• Earnings Per Share (EPS) CAGR: 11% / Beverage Peers: 4%
• Total Shareholder Return (TSR): 64% cumulative over the period / Beverage Peers: 36%
• Price-to-Earnings (P/E): 15x / Beverage Peers: 21x
Other indicators:
Piotroski F-Score: 7, indicating relatively strong financial health.
• Fair Value: The stock appears undervalued, with potential to rise to $41-$43 over the next months/years.
• GF Value Rank: 85/100.
• Caution: There is concern it could be a value trap despite positive valuation indicators.
Market Share:
• Dr Pepper market share: 9%.
• Diet Dr Pepper market share: 3%.
• For comparison, Fanta holds a 3% market share.
Stock Performance:
• Performance 2024 around 10%+.
• Insider confidence is high, with a significant number of insider buys since 2023.
Personal Opinion
• I think the stock is undervalued, with a potential price increase to $41-$43 in the next months or year. Personally, I now hold a small position in my portfolio, but my strategy on this stock is long term hold.
• P/E ratio of 15x suggests the stock is relatively affordable compared to peers.
• There are, however, warnings of a potential value trap, where the stock may underperform despite appearing cheap.
This information is for informational purposes only and does not constitute financial or investment advice. Always do your own research or consult a financial professional before making investment decisions.
