Beaten down though its stock may be, Coca-Cola (NYSE:KO) still holds an elite place. Consistently rated near the top of best-known and most-valuable brands worldwide, there are very few places on Earth where you won't be able to find a Coke. That's remarkable in the beverage world, where consumer tastes are notoriously fickle and regional. Contrast Coke's success with the international difficulties faced by beer giant Anheuser-Busch (NYSE:BUD). Anheuser couldn't even get its flagship Budweiser name in this year's World Cup in Germany in spite of being an official sponsor of the event.

Such tremendous size and worldwide market penetration brings with it a tremendous benefit -- cold, hard cash. Lots of cold, hard cash. To be specific, here's the operating cash flow thrown off by this beverage giant over the past few years:

Year Operating Cash Flow Y/Y change
2000 $3,585,000,000 N/A
2001 $4,110,000,000 14%
2002 $4,742,000,000 15%
2003 $5,456,000,000 13%
2004 $5,968,000,000 9%
2005 $6,423,000,000 8%

I'll acknowledge that 2005 was a relatively slow growth year -- the company's operations "merely" managed to pull in 8%, or $455 million more than the year before. Of course, that's on a base that was already in the $6 billion ballpark. All told, Coca-Cola's operations threw off more than $30 billion dollars worth of cash since we laughed off the Y2K bug, and last year's cash production was a full 79% higher than that of the year 2000.

Better yet for shareholders, Coca-Cola has a well-deserved reputation of distributing that cash to its owners. Since 2000, the company's annual dividend has increased from $0.68 a share to the current $1.24. Over that same time, Coke's share price has actually decreased. This, of course, has simply made it easier for shareholders to buy more cash flow, more dividends, and a larger chunk of an extremely strong firm. In fact, Coke's stock recently got so inexpensive that it found itself among those selected to be part of Motley Fool Inside Value, the Fool's market-beating value investing newsletter.

What will tomorrow bring?
Of course, as my dueling partner Rick Munarriz will no doubt mention, stocks are valued based on their future potential, not their past glory. With the recent announcement that Coca-Cola and archrivals PepsiCo (NYSE:PEP) and Cadbury Schweppes (NYSE:CSG) would be pulling their carbonated soda brands out of schools, it may give investors reason to pause. However, I'll mention three reasons why Coca-Cola may just prosper from such a move:

  • Minute Maid
  • Dasani
  • Odwalla

All three are Coca-Cola brands, and each benefits from the new agreement. In reality, the Coke brand itself doesn't need to reach school-age kids in the classroom to be part of their lives. Replacing its carbonated, caffeinated, and sugared mainstay in schools with alternatives such as these will provide ample opportunity for Coca-Cola to widen the reach of its smaller brands. In the long run, that should help the company sustain its growth, in spite of its already universal presence.

Such moves likely represent Coca-Cola's best opportunities for growth. Fortunately, with a worldwide distribution system that rivals Wal-Mart's (NYSE:WMT) in size and complexity, Coca-Cola already has the infrastructure in place to support a global expansion of its smaller brands. By leveraging that existing network, it's much easier for the company to move more of its products around the planet. These moves should lead directly to scale benefits that will drive increased efficiency and profitability.

Even so, thanks to the combination of its past earnings growth and its stagnant stock, Coke need not grow outrageously fast to justify where it's trading today. In fact, adding its 2.9% yield to its projected long-term 8%-9% earnings growth rate indicates that its shares are quite nicely priced. With numbers like that, a long-term total return rate in the neighborhood of 10.9%-11.9% is not out of the question. That's not too shabby for a giant company like Coca-Cola.

The Foolish bottom line
With unparalleled brand equity, tremendous financial strength, and an amazing worldwide distribution system, Coca-Cola is clearly a global powerhouse. Include an attractive enough valuation that makes it worthy of a spot on the Inside Value roster, and Coca-Cola becomes a company seriously worth considering as an investment.

Value investing is all about buying the right companies at the right price. Coca-Cola is just one of several well-known firms whose stock price currently underestimates the earnings potential of the underlying business. Click here to take a free 30-day trial to Inside Value and discover what other sale-priced businesses are hiding out in plain sight.

Anheuser-Busch is also an Inside Value pick.

Think you're done with the Duel? You're not! Go back and read the other three arguments, and then vote for a winner.

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta had no ownership position in any of the companies mentioned in this article. The Fool has a disclosure policy.