Coca-Cola Amatil Ltd (ASX: CCL) shares have been in the doldrums for the better part of two years now, despite a change of CEO and several strategic improvements.
Although the business is expected to return to earnings growth this financial year, many investors are still wary of owning Amatil shares, noting its relative underperformance over the past decade and persistent weak share price.
However, I believe that Coca-Cola is still a buying opportunity for the right (read: patient) investor. In addition to a great brand, broad distribution footprint, decent margins and a solid balance sheet, Amatil shares also look reasonably undervalued.
I valued the company earlier this year and, after updating its latest results into my model, the stock still looks to be worth around $11-12 using conservative assumptions. If Indonesia begins to perform and the company manages to lift sales of other products (alcohol, iced coffee, etc) then there is room for upside.
Competition between Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) is likely to continue to impact on margins in the near term, while adverse economic conditions in Indonesia are likely to delay that segment's development towards profitability.
The patient investor knows that these challenges can be overcome with time, and given its competitive advantages and a great dividend I believe Coca-Cola Amatil shares are a reasonable purchase at today's prices.
