Should you buy Coca-Cola Amatil?

The company is trading at 52-week lows, but the long-term growth of this business remains impressive.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Coca-Cola Amatil (ASX.CCL) is trading at 52-week lows today as investors worry about falling earnings potential in its Australian market. Aggressive competitor discounting and weak consumer sentiment resulted in management reporting a profit downgrade at May's Annual General Meeting. This has been reflected in the recent share price downturn, but long-term investors may see this as an opportunity.

Coca-Cola remains one of the world's most powerful brands and is popular the world over. The parent company, The Coca-Cola Company (NYSE: KO), is one of the all-time great success stories. Its Australia-based marketing, distribution and drinks-bottling arm, Coca-Cola Amatil, remains in a strong position to leverage the benefits of its parent company's strengths.

Between 2001 and 2012, Coca-Cola Amatil created a total shareholder return of 373% versus the S&P/ASX 100 Index's (Index: ^XTO) of 145%. Over the same period earnings-per-share (EPS) have grown 10.2% at a compounded annual growth rate (CAGR). Those are impressive statistics. However, flat year-on-year forecast earnings for 2013, before interest and tax, are what have seen the share price fall. If the company can continue to outperform on a long-term basis, though, recent share price dips may represent a buying opportunity for Foolish investors. The company continues to lead the way in brand, product and packaging innovation, and continues to develop key growth markets.

One such market is Indonesia, one of the world's most populous countries. With a rapidly growing economy to match, the Indonesian market represents an opportunity for the kind of growth to get investors excited. 2012 saw earnings before interest and tax increase 16.8% for Indonesia and Papua New Guinea. With the growth outlook remaining favourable for these regions, Coca-Cola Amatil has continued to increase capital expenditure,  and develop beverage production capacity and capability for the regions. Increased investment should contribute to continuing strong results.

Management also aims to find cost savings of $30-40 million over the next few years, primarily by taking advantage of new manufacturing and technology platforms that have been introduced across the business in the past three years. The business is not just about bottling Coca-Cola though. It's also planning to re-enter the Australian premium beer market in December 2013, and continues to bottle and distribute household brands such as Fanta, Sprite, Powerade and Pump. All in all this business is well worth a look.

Foolish takeaway

Foolish investors know that great businesses with competitive advantages make for excellent long-term investments. At today's price of just over $12, Coca-Cola Amatil ticks all the boxes, and with the shares providing a dividend yield of around 4.5%, it looks a solid opportunity.

If you're looking for a solid investment idea, click here now to get The Motley Fool's special FREE report, "3 Stocks for the Great Dividend Boom". The report lists the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »