Valuation levels are quite similar, but Coke has delivered better performance over the last five years with earnings-per-share growth of 9% annually versus 2.7% for Pepsi. If you are looking for a high-quality bet in the sector, The Coca-Cola Company (NYSE:KO), which owns the most valuable brand in the world according to Interbrand, may be the way to go.
Those searching for alternatives with superior growth potential, may want to take a look a smaller, more dynamic, companies like Monster Beverage Corp (NASDAQ:MNST).
Monster Beverage Corp (NASDAQ:MNST) is the second biggest player in energy drinks behind Red Bull. The company has benefited enormously from growing demand over the last years: Monster delivered earnings-per-share growth in the area of 20% annually in the last five years, and it still has plenty of opportunities for international expansion.
On the other hand, growth has decelerated materially in the last quarter, and health concerns surrounding energy drinks are a remarkable risk for the company. The recent pullback after the disappointing earnings report may easily turn out to be a buying opportunity, but investors need to pay close attention to the health implications and changing consumer habits among the younger demographics which are Monster´s prime market.
With a market cap of $1.4 billion Sodastream International Ltd (NASDAQ:SODA) is much smaller than other players in the industry, but the company has a disruptive business model and is delivering outstanding financial performance.
The company is revolutionizing the carbonated drinks industry by allowing consumers to make their own carbonated beverages at home with a variety of different flavors. This provides many advantages over traditional soda consumption: more flexibility, lower costs, better environmental implications, and much healthier choices.
Consumers are embracing the product. Sodastream International Ltd (NASDAQ:SODA) delivered an annual increase of 38.4% annually in sales and 55.9% in earnings per share over the last five years. Last quarter was above analyst’s expectations too as the company reported a 28.5% increase in revenue during the quarter, and earnings per share grew at an even faster 33.3%.
Performance was strong across the board. Soda maker unit sales increased 18% in the quarter, carbonator refills grew 30%, and flavor sales were 25% higher versus the same quarter in the previous year. The Americas segment, where companies like Coke, Pepsi and Monster are facing difficulties, showed a whopping increase of 55% in revenue.
SodaStream is the disruptive player in the industry, considering its relatively small size, innovative business model and outstanding financial performance; this is a good alternative for investors looking to position themselves in a company with exceptional growth prospects in the business.
It all depends on your overall investment strategy. When it comes to dividend investors looking for rock-solid defensive plays in the soft drinks business, there is no match to The Coca-Cola Company (NYSE:KO). However, if you want to add more flavors to your portfolio, SodaStream offers some truly outstanding potential for growth over the coming years.
The article The Best Soft Drink Company for Your Portfolio originally appeared on Fool.com and is written by Andres Cardenal.
Andrés Cardenal owns shares of SodaStream. The Motley Fool recommends Coca-Cola, Monster Beverage, PepsiCo, and SodaStream. The Motley Fool owns shares of Monster Beverage, PepsiCo, and SodaStream.
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