Despite hitting a 52-week high, Coca-Cola HBC stock still looks great value

Our writer reckons one flying UK share that has been participating in the recent FTSE 100 bull run remains a top value stock.

| More on:

Image source: Britvic

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

The FTSE 100 might be on fire lately, powering above 8,150 points for the first time, but there are still plenty of value stocks about.

The numbers alone tell us this. UK stocks are trading at about half the forward price-to-earnings (P/E) ratios of US firms. So the recent UK market rally could have some way to go yet.

One Footsie share that I’ve had my eye on is drinks bottler Coca-Cola HBC (LSE:CCH). The share price has just reached a 12-month high of £26, but I think the stock still offers great value. Here’s why.

How the setup works

First, a little bit of info on this Swiss-based company. It has the exclusive rights to manufacture and sell Coca-Cola products across 29 countries, ranging from Ireland and Poland to Nigeria.

This provides a nice blend of established, developing, and emerging markets. If one or two nations’ economies falter, which is always a risk, there are all the others to offset such weakness.

Indeed, no single country represents more than 20% of sales volume. I like this diversification.

The company generally buys the bases and syrups from Coca-Cola to produce drinks like Fanta, Sprite, and Coca-Cola, then distributes the finished products. Meanwhile, the US drinks giant controls the brand identity and product development. 

Beyond carbonated soft drinks, it makes and sells energy drinks, bottled water, and juice, as well as snacks.

Below, we can see the varied portfolio (the figures are FY 2023’s sales weighting of each category).

Source: Coca-Cola HBC 2023 annual report

Some eagle-eyed readers will have noticed other brands in the lineup, including Monster Beverage. The great thing here is that the firm also benefits from Coca-Cola’s strategic partnerships with top brands like Monster. 

Strong financial performance

In its latest Q1 results (for the three months to 29 March), the company announced a 12.6% increase in organic net sales revenue, reaching €2.23bn. This was higher than analysts’ expectations for 9.5% growth.

The firm successfully passed on price rises to consumers, thereby displaying pricing power, while seeing volume growth and market share gains.

For the full year, it expects annual organic operating profit growth in the 3%-9% range.

In 2019, Coca-Cola acquired Costa Coffee for $4.9bn, and Coca-Cola HBC sees branded coffee products as a high-growth market. In the quarter, this segment grew 34.3%, backing this theory up.

It also just launched Monster Energy Green Zero Sugar in 16 markets.

I like the value here

Despite rising 23.3% in six months, the stock is trading on a forward P/E ratio of 14.

For a firm selling to 740m potential consumers across three continents, with plenty of growth potential left, I reckon that is a certified bargain.

Remember, many of its markets, including Italy, Croatia, and Egypt, should continue to see rising tourism, which means more holidaymakers sipping Coca-Cola and Fanta (drinks they’re familiar with) in hotels and restaurants.

The flip side to this, of course, is that another pandemic could hammer global tourism and therefore sales growth. So this is a risk.

However, I like the long-term investment case here. As Coca-Cola brings more fast-growing brands into its stable over time, the FTSE 100 bottler should continue growing its profits.

As such, I plan to snap up this value stock in May.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Monster Beverage. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 14% in 2024, what’s next for the Lloyds share price?

This Fool takes a closer look at what prompted the Lloyds share price to rise this year, and offers her…

Read more »

Investing Articles

5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here's…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

3 growth stocks I’m desperate to buy as the FTSE 100 dips

Never waste a dip, says Harvey Jones. Three of his favourite growth stocks have fallen over the last month and…

Read more »

Investing Articles

I’d use a £10K ISA to try and generate £900 in dividends annually like this!

Christopher Ruane explains how he would invest a Stocks and Shares ISA in blue-chip companies to try and set up…

Read more »

Investing Articles

Here’s how I’d build a second income stream worth £1,228 a month by investing £10 a day!

A second income stream could come in handy later in life. This Fool explains how she’d build one by investing…

Read more »

Investing Articles

5 FTSE 250 stocks I’d buy for a lifetime of passive income

Here's why I think the FTSE 250 could be the best UK stock market index to go for in 2024…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Buy cheap FTSE shares, says HSBC

Analysts at HSBC have upgraded their rating of FTSE stocks and reckon the blue-chip UK index could carry on powering…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

It could be worth buying the dip for this FTSE 250 stock, down 7% today

Jon Smith spots a sharp drop in a FTSE 250 stock but explains why this could just be a blip…

Read more »