The Coca-Cola Company (KO), PepsiCo, Inc. (PEP), Dr Pepper Snapple Group Inc. (DPS): Can These Stocks Pop? Or Will They Go Flat?

PepsiCo, Inc. (NYSE:PEP) is looking to expand through growth in developing and emerging markets. As of 2012, Pepsi receives only 35% of its revenue from emerging markets. This figure stands to increase as the company pushes its snack and beverage businesses into developing markets such as China, Africa, and Latin America.

An underdog that provides value

Source: Yahoo! Finance

Dr Pepper Snapple Group Inc. (NYSE:DPS) is currently trading at a price-to-earnings ratio of 15.93 times, which is a discount to both the sector and the S&P 500. Its price/earnings-to-growth ratio is 2.1, meaning that the earnings growth of Dr. Pepper Snapple is trading at a better value than that of both Coca-Cola (2.7) and PepsiCo (2.4).

Dr Pepper Snapple Group Inc. (NYSE:DPS) is a much younger entity and doesn’t have the rich dividend growth tradition of the other two. In a mere five years, however, the company’s dividend has gone from $0.15 per share in 2009 to $1.36 per share in 2013. This dividend yields higher than Coca-Cola and PepsiCo, and on top of that checks in with a payout ratio of only 48.5%. This puppy has room to stretch its dividend legs (and beats out Coca-Cola and Pepsi on dividend returns).

Financially, Dr Pepper Snapple Group Inc. (NYSE:DPS) lives in the same neighborhood as PepsiCo and Coca-Cola. It carries a total-debt-to-equity ratio of 1.1, has a net profit margin of 10.14%, and achieves a 26.53% return on equity.

Dr Pepper Snapple Group Inc. (NYSE:DPS) is an interesting prospect. It is moving in the right direction, and has the core brands of a solid portfolio (Dr. Pepper, Snapple, 7UP). Due to this, Dr. Pepper Snapple has some possible growth catalysts in its valuation, smaller size, and competitive brand portfolio.

The bottom line

Even with the soda industry hitting a slight slowdown, you shouldn’t shun these three industry stalwarts. If you look past their names, you will find immense brand portfolios that can drive growth moving forward domestically, as well as in emerging markets. Whether it’s the international presence of Coca-Cola, the diversity of PepsiCo, or the valuation and shareholder returns of Dr. Pepper Snapple that interests you the most, each company deserves a look.

The article Can These Stocks Pop? Or Will They Go Flat? originally appeared on Fool.com and is written by Justin Pope.

Justin Pope has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo.

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