I'm not reinventing the wheel here, but one can of regular Coca-Cola from Coca-Cola Amatil Ltd (ASX:CCL) yields 44% of your daily sugar.
Put another way, there is slightly more than 10 teaspoons of sugar (with approx 4 grams of sugar in each) in only one fizzy elixir.
Coca-Cola Amatil's Share Price Fizzle
The chart above shows the share price of Coca Cola Amatil. As can be seen, the graph plots a 21% fall in the company's share price over the past five years. That compares to the market's, or S&P/ASX 200's (INDEX: ^AXJO) (ASX: XJO), 26% return. Both figures do not include dividends paid.
Now, you may think I'm cherry (Coke?) picking the graph to make a point, so here is the chart over 10 years:
Studying share price charts is a mug's game, in my opinion. But we can see that over the past decade, the company has outperformed the market (although that is not saying very much!) at a healthy clip.
Can Coke Cure a Rusting Share Price?
For anyone that has ever dunked a rusted coin in Coke, you know it is a special kind of product. But can those powers that be, save the Coca-Cola Amatil share price?
Despite a massive stimulus from its parent, The Coca-Cola Company, it appears Coca-Cola Amatil is still required to take the guillotine to costs to keep the brand moving forward. When I see "Cost Optimisation", as an investor, I think 'Oh, another deep value stock" — not 'we have a go-getter growth story on our hands'. Nonetheless, they can make for great investments.
As any value investor knows the devil is in the detail with these things. The company's push into water, alcohol and 'better-for-you' products diversifies the risk of structural decline in fizzy drinks. Geographical diversification also helps. On this point, investors should avoid becoming parochial.
However, Coca-Cola Amatil has long touted the growth potential of its Indonesian business.
But once again we are reminded to remain cautiously optimistic of management's strategy. Because even if Coca-Cola Amatil executes its strategy, management expect the Indonesian business to have a profit margin before interest and tax of just 10% by 2023. Return on capital employed is expected to breakeven in 2020.
Is there any value left?
Ultimately, you would be happy to pay a decent price for Coca-Cola Amatil shares in spite of the gloomy outlook given its brand strength. However, even on a forward looking basis the company's shares change hands for 17 times next year's expected profits, in-line with the market average. The company also pays a respectable 4.8% dividend.
The average Coca-Cola Amatil share price target of the 10 analysts surveyed by The Wall Street Journal is $9.45. Shares currently trade at $9.37 — hardly fantastic value.
Foolish takeaway
The calorie burning question every investor is asking is: Are fizzy drinks makers in structural decline?
I wouldn't go so far to say they are in a structural decline, but consumers are indeed becoming more health conscious. And admittedly, Coca-Cola Amatil has recognised this uncertainty by pushing into other categories.
Unfortunately, with the company expected to grow profits per share at anaemic levels and the share price riding high, my advice for investors is – get your sugar hit somewhere else.
