Why Is PepsiCo So Much Cheaper Than Coca-Cola? This Is the Only Answer I Can Think Of.
The two seemingly similar companies differ in a couple of key ways. These differences aren't necessarily permanent, though.
Overview
On the surface, the two companies seem almost interchangeable in any investor's portfolio. PepsiCo (NASDAQ: PEP) also owns Frito-Lay snack chips, but like rival Coca-Cola (NYSE: KO), its biggest business is ready-to-drink bottled beverages.
Yet, these two stocks are miles apart in multiple ways. One of the biggest reasons is their recent performance. Over the past two years, Coca-Cola shares have rallied nearly 31%, while PepsiCo's have fallen more than 19%. This in turn has created another notable difference between the two tickers. Whereas KO is priced at a premium trailing price-to-earnings ratio of just over 26, PEP is markedly cheaper at a P/E of a little more than 18. Their forward-looking dividend yields are similarly disparate, at 2.4% and 4.2%, respectively. Again, it's strange simply because these two companies don't seem different enough to justify such a wide valuation spread.
Details
But I think I've got it figured out. And it's not complicated.
Source
Originally published at www.fool.com.
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