The two soft drink giants, Pepsico and Coca-Cola, have limited growth left. However, the Dr Pepper Snapple Group (NYSE:DPS) has lots of room to stretch into growth. Long-term, it may not be as safe as Pepsi or Coca-Cola, but it can outperform both of these companies for the next year or two. Here's why:
Dr Pepper Snapple Group currently only operates in North America. There is a possibility for them to become as global as pepsi or coca-cola. Is that their intent? I have no idea, but I would imagine so.
DPS's gross operating profit has been rising gradually but steadily year after year, from 2.81B in December of 2006 to 3.40B in December of 2009.
DPS's net income has been rising even more steeply. In 2008, the company suffered a net loss of 300M. The next year, it rebounded quickly and had a net income of 555M. For the long term picture, the net income in 2006 was 510M.
DPS has an annual yield of about 2.8%, just like Coca-Cola and Pepsico.
DPS offers drinks that Coca-Cola and Pepsi do not, such as their ready made teas.
DPS owns their bottling company. This excerpt is taken from their investor relations site:
The acquisition and creation of our Bottling Group is part of our longer-term initiative to strengthen the route-to-market for our products. We believe additional acquisitions of regional bottling companies will broaden our geographic coverage and enhance coordination with our large retail customers.
There is a scare of higher expenses for ingredients. However, all good companies turn these numbers around, as I believe DPS will.
Coca-Cola and Pepsico are great companies for long-term gains. However, in the next couple of years, I believe DPS will outperform both of these stocks.
I am ready to buy, but waiting for its stock to come down a little bit to my new buy target price of $34.50.
Hit that Bull's Eye!
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