Coca-Cola (KO 0.91%) had a strong first quarter, easily besting peer PepsiCo's (PEP 0.27%) lackluster performance. Coca-Cola, the world's leading beverage company, is projecting strong results through the rest of the year. That's good news for the business, but it may not be good news for investors looking to buy the company today.
What does Coca-Cola do?
Coca-Cola is best known for its namesake soda brand. However, its collection of beverages goes well beyond bubbly drinks. It owns Costa, a coffee chain, sells plenty of non-soda sugary drinks, and is increasingly working to grow its non-sugary drink portfolio. It has both global brands that virtually everyone knows, like Coke, and market-specific brands that might not have the same broad appeal outside of a select region because of the taste profile of the product.
Image source: Getty Images.
That's notable because it highlights the fact that Coca-Cola sells products in more than "200 countries and territories" around the world. That fact highlights the company's vast size. It has a $300 billion market cap, and its distribution and marketing chops are industry-leading. It also has a powerful research and development team.
All in, Coca-Cola is an industry leader not just in the beverage niche but in the consumer staples sector as a whole. As a business, it is very attractive, and it is understandable that investors would be interested in the stock. That's particularly true given the 6% organic sales growth Coca-Cola put up in the first quarter of 2025, even as competitor PepsiCo only managed organic sales growth of 1.2%.
NYSE: KO
Key Data Points
Coca-Cola should have a strong year
What's even more notable is that Coca-Cola reaffirmed its full-year guidance for organic growth to fall between 5% and 6%. PepsiCo, by contrast, continues to expect relatively weaker performance for the year. So, Coca-Cola should be the winner, business-wise, between these two companies that often compete head-to-head.
The problem is that investors are already well aware of the diverging performance numbers here. Coca-Cola's stock is up notably over the past 12 months, while PepsiCo's shares are down notably. That's understandable, but there's a broader comparison that's worth making since, as the chart below shows, Coca-Cola is also outperforming the average consumer staples stock. It's leading by a full 10 percentage points, which is huge and suggests that, perhaps, investors are a little too excited about Coca-Cola today.
Data by YCharts.
That view is backed up by traditional valuation metrics. Coca-Cola's price-to-sales, price-to-earnings, price-to-book value, and price-to-cash flow ratios are all above their five-year averages. But that's not the whole story either. Coca-Cola's P/E ratio is around 28.5x versus a five-year average of 26.5x and the consumer staples average of a little over 23x. The S&P 500 index's (^GSPC 0.11%) P/E ratio is only around 22x. Coca-Cola's stock isn't cheap.
Coca-Cola is likely to remain expensive
Given management's still strong outlook for the future, it seems highly likely that Coca-Cola stock will remain expensive in a year's time. That's wonderful if you own it already, but not so great if you are just starting to consider the stock today. As famed value investor Benjamin Graham has noted, even great companies can be bad investments if you pay too much for their stocks. Struggling PepsiCo, however, might be worth a deep dive given that its valuation looks historically attractive.
