Profits
One should rely on the SEC Edgar and the Coca-Cola Company’s official websites to thoroughly analyze and compare the companies’ financial statements and profits. PepsiCo’s gross profit was $45,816 in 2022 and $42,399 in 2021 (PepsiCo, Inc., 2022). Coca-Cola’s gross profit was $33,065 in 2022 and $32,087 in 2021 (Coca-Cola, 2022).
It is worth noting that PepsiCo outperformed its competitors in gross profit in both 2021 and 2022. At least in 2021, $42.399 (PepsiCo) is 132.14% of $32.087 (Coca-Cola), and in 2022, $45.816 (PepsiCo) is 138.56% of $33.065 (Coca-Cola). A similar situation is observed in the current year, but PepsiCo is still ahead not only in gross profit but also in operating profit. The financial indicators of the two companies are growing without fluctuations; Coca-Cola lags behind PepsiCo in some parameters today.
Working Capital
Working Capital = Current Assets (Net of Depreciation) – Current Liabilities.
According to the Macrotrends LLC website, Coca-Cola’s working capital is $27.591 – $24.115 = $3,476 (as of June 2023).
Working Capital at PepsiCo = $24.954 – $29.618 = $-4,664B (June 2023).
PepsiCo needs to sell non-current assets to repay short-term liabilities.
Price-Earnings Ratio
Price-Earnings (P/E) Ratio = Stock Price / Earnings per share.
According to the Motley Fool website, P/E at Coca-Cola is $58.33 (September 8, 2023) / $2.43 (latest financial reports) ≈ $24.
P/E at PepsiCo = $176.27 (September 8, 2023) / $5.73(latest financial reports) ≈ $30.
Debt-to-Equity Ratio
Debt-to-Equity Ratio (D/E) = Total Debt / Total Shareholders’ Equity.
According to the Macrotrends LLC website, D/E at Coca-Cola = $41,62B / $27,552B ≈ $1,51B (June 2023).
D/E at PepsiCo = $43,62B / $17,68B ≈ $2,46B (June 2023).
Discussion
A firm’s profits denote differences between revenues from sales of goods and the costs of creating them. Such concepts help one to evaluate historical performance, make projections, and improve future financial performance (Keown et al., 2020). Seeing some critical relationships through each calculation is possible with principles such as “Conflicts of Interest Cause Agency Problems,” “Market Prices Are Generally Right,” and “Risk Requires a Reward” (Keown et al., 2020). Working capital determines the degree of solvency and financial stability of the organization. P/E means the value of Coca-Cola and PepsiCo, and D/E means the debt coverage ratio of these firms.
Investment Considerations
Coca-Cola and PepsiCo are solid investments due to their substantial growth prospects. Coca-Cola provides investors with a higher annualized return, while PepsiCo offers a good balance between growth and earnings (Kalogeropoulos, 2023). Based on the Capital Structure Theory, they have an optimal capital structure, which minimizes the WACC and maximizes value (Keown et al., 2020). Based on the Residual Dividend Theory, they support the policy of residual dividends.
Limitations
This financial analysis has several limitations, including the reliance on specific data sources, the quantification of certain variables, and the inability to account for external factors. The information available on the Internet does not always contain factual data and may be subject to manipulation by corporations. Examining financial performance does not consider external factors or qualitative aspects, such as management expertise, company strategy, or industry trends, that may affect the firm’s financial position.
References
Coca-Cola. (2022). Coca-Cola Form 10-K annual report for the fiscal year ended December 31, 2022.
Kalogeropoulos, D. (2023). 3 reasons PepsiCo stock is a buy. The Motley Fool.
Keown, A.J., Martin, J.D., & Petty, W. (2020). Foundations of finance (10th ed.). Pearson.
PepsiCo, Inc. (2022). PepsiCo, Inc. Form 10-K annual report for the fiscal year ended December 31, 2022. U.S. Securities and Exchange Commission.