PepsiCo is a good investment because it is a well managed company with strong sales in a large market that is both diverse and world wide. PepsiCo continues to innovate and penetrate new markets (for example the flavored water market), and is not losing market share to competitors. PepsiCo is a safe investment because there will always be a demand for Pepsi 's products, even during recessions, and therefore the stock will be resistant to cyclical changes in the market and economy. The dividend does not provide huge amounts of income, but it is a nice cushion. PepsiCo 's income statement shows that 2006 Net Income was significantly higher than both 2004 and 2005 (35% and 38%). One of the key factors that account for this growth is …show more content…
This is important in developing sales in second and third world countries. The Decline in 2006 compared to 2005 is primarily from these increased international sales. The Asset turnover ratio combined with the Operating Margins (trailing twelve month period) of 18.44% indicates that PepsiCo is efficient at generating revenue form its assets.
Profitability Ratios The Profit Margin on Sales and Rate of Return on Assets indicate that PepsiCo is a profitable company, and is seeking ways to increase profits. The Pay Out Ratio is smaller for 2006 than 2005 but is not informative taken by itself. Net Income and Cash dividends both increased in 2006 over 2005. Retained earnings increased 18%. The increase in retained earnings came principally from greater net income, not from a decrease in cash dividends, because there was an overall increase of 13% in cash dividends paid in 2006 over 2005. PepsiCo compares favorably with industry averages for the Processed & Packaged Goods Industry. The Earnings/ Share(EPS) and Price to Sales (PSR) are well above average, while Price to Earnings(P/E) and Price/Earnings to Growth(PEG) are near the industry average. The strong profits and high revenues of PepsiCo are reflected in the high EPS and PSR numbers. The higher than average stock price for PepsiCo and large market share lower the P/E and PEG ratio versus the industry average. The competitor analysis indicates that while the Coca-Cola Company is the leader in
2. Starbucks enjoyed strong financial performance in 2011. The company did not explicitly attribute this, but with an 8% rise in same store sales it seems that either the consumer market bounced back, or Starbucks made changes that attracted more consumers. The company feels that it offered better products and a better experience at its stores. The company also credited operating efficiencies and tight control of spending for improved profits. In addition, the company continued its global expansion, which improved the top line, and used the economies of scale it generated as part of its cost control program.
From a financial perspective, Costco’s income statement shows it has increased its total revenue from its domestic and foreign stores every year. Operating income, total and net assets, and number of warehouses have increased steadily each year. However, long-term debt has sharply increased after 2006 and stockholder’s equity has been inconsistent for the past few years. Newer warehouses are being built to its maximum size and top volume warehouses would exceed $5 million in sales per week.
The dividend payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio. This is well evident with Pepsi Co’s dividend payout ratio of 45.95% as compared to Coca-Cola’s 20.11%. A low dividend payout is always better as it leaves more room for the company to increase dividend payouts in the future while a high ratio means there is less room.
* Overall, despite the drop in price earnings ratio, Pepsi has increased the value of its stock. By increasing investor incentives and demand, Pepsi can also regain positive numbers in its future price earnings ratios
According to PepsiCo “Organic revenue grew 5 percent in the fourth quarter and in the full year, reported net revenue declined 1 percent for the quarter and 1.5 percent for the full year, reflecting the impact of previously announced structural changes” (PepsiCo, 2013). The cost of running the business paid off from a revenue standpoint but overall net revenue fell by one percent. Additionally, Pepsi remained exceedingly concentrated on generating appealing returns for shareholders, and returned $6.5 billion to shareholders in 2012 “through a combination of share repurchases and dividends,” (Pepsi, 2013) This increased costs for the company but the cost spending implemented paid off for shareholders who would be more willing to invest more in the company in the future.
During this time, sales increased from: $7.11 billion in 2010 to $7.99 billion in 2012. Earnings improved from $2.84 to $3.57. While the total amount of dividends rose from $1.00 to $1.72. These figures are showing how the company has been continually increasing sales, earnings and dividends over the last three years. In the future, the management predicts that their current strategy will increase returns. As, executives believe that their focus on building the brand and accounting for costs will lead to net earnings of $5.20 to $7.19 annually by
Profitability ratios decreasing from 2005 to 2006 although the sales has increased substantially and the net income as well but not in the same percentage of increase due to the high reliance on debt as the interest expense increased as mentioned before.
During this period, the Return on Assets increased from 5.7% in 2012 to 34.6% in 2013. This implies the number of cents earned on each dollar of assets increased from 2012 to 2013. This shows that the business has become more profitable. Equally, the Return on Equity also increased from 12.0% in 2012 to 46.5% in 2013. This similarly implies that the company in 2013 was more efficient in generating income from new investment. This, also can be attributed to the sale of the Digital Business Brand which enabled the company appraise its strategic plan.
Operating profit margin figures in the table above show the return from net sales[13]. However profit margin ratios are high enough for the 3 years, there is a fall from 12.86% to 11.26% during 2011-12. Sales revenue increases with a higher rate than gross profit so there is a poor
Next, I invested in a popular food and beverage company, PepsiCo Inc. PepsiCo is comprised of multiple consumer segments in North America such as: Frito Lay, Quaker Foods, Aunt Jemima mixes and syrups, Aunt Jemima mixes and syrups, Quaker Chewy granola bars, Cap n Crunch and Life cereals, and Rice-A-Roni side dishes. The popular beverage segment includes beverage concentrates, fountain syrups, and finished goods such as Pepsi, Gatorade, Mountain Dew, Aquafina, etc. Since PepsiCo is worldwide, it has a handful of segments that provide consumer goods to various country and serves wholesale distributors. The company was founded in 1898 and is headquartered in Purchase, New York and expanded worldwide first entering Japan an Eastern Europe in 1966 (PepsiCo). The company was established by a merger with Pepsi-Cola and Frito-Lay and continues to add more brand names to its company today. On March 22nd, 2014 the net income applicable to common shares was 1,216,000,000 this number is a slight decrease from the 1,742,000,000 net income applicable to common shares on December 28, 2013 (Yahoo Finance). Earnings this year have been good with a positive numerical percentage of 3.76%. In the past year PepsiCo has invested five billion dollars in Mexico. This five-year investment plan Focuses on Innovation and Brand
Comparing financial data from statements can help determine whether or not it is a sound decision to invest in a company. This information can also help determine if a company is operating successfully and areas of risk within the company. This analyzing can help one company compare itself to another company and ensure that they are able to compete with other companies in their respective industries. PepsiCo and Coca-Cola are two major companies that make a majority of their money from producing and selling soft drinks. To compare these companies we are going to use vertical and horizontal analyses to see if these
Pepsi Co 's assignment taken as a whole is to amplify the value of its shareholder 's investment through sales intensification, expenditure gearshift and prudent investment of resources (Bongiorno, 1996, p 71). In this pose, Pepsi believes that its moneymaking triumph depends on
PepsiCo and Coca-Cola are fierce competitors and according to their financial statements they are both healthy companies. Therefore I would invest in Coca-Cola if I had to make the decision because it has higher income, a stronger long-term debt to networking capital ratio, steadily rising net income per common share, and a climbing and high solvency ratio. PepsiCo still shows healthy growth and outperforms Coca-Cola in many areas. I will conduct a financial analysis of Coca-Cola and PepsiCo to identify their strengths and weaknesses, ultimately deciding which one is worth the investment.
Pepsi-Cola brand is a brand that has been established within the refreshment industry since the 19th century. Pepsi pride the business of consumer products in beverages and snacks, on being one of the best in the world. They seek