Stock market

Despite touching a 52-week high, Coca-Cola HBC stock still looks very valuable.

gave FTSE 100 It may have caught fire recently, powering above 8,150 points for the first time, but there are still plenty of valuable stocks to be had.

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

One footy share I had my eye on is Drink Bottler Coca-Cola HBC (LSE:CCH). The share price has just hit 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 information about this Swiss-based company. It has exclusive manufacturing and selling rights. Coca Cola Products in 29 countries, from Ireland and Poland to Nigeria.

It provides a good mix of established, developing, and emerging markets. If one or two countries’ economies collapse, which is always a risk, everyone else is there to pick up the slack.

In fact, no country represents more than 20% of sales volume. I love this diversity.

The company generally buys bases and syrups from Coca-Cola to produce beverages such as Fanta., SpriteAnd Coca Cola, then distributes the finished product. Meanwhile, the American beverage giant controls brand identity and product development.

Apart from carbonated soft drinks, it manufactures and sells energy drinks, bottled water and juices as well as snacks.

Below, we can see the diversified portfolio (figures are weighted sales of each category for FY2023).

Source: Coca-Cola HBC 2023 Annual Report

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

Strong financial performance

In its latest Q1 results (3 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 the price increase on to customers, thereby demonstrating pricing power, while seeing volume growth and market share increase.

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

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

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

I like the value here.

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

For a firm that sells to 740 million potential customers across three continents, with plenty of growth potential left, I think this is a guaranteed bargain.

Remember, many of its markets, including Italy, Croatia and Egypt, should continue to see increased tourism, which means more vacationers sip. Coca Cola And Fanta. (drinks they are familiar with) in hotels and restaurants.

The flip side, of course, is that another pandemic could hurt global tourism and therefore boost sales. 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 to grow its profits.

Thus, I plan to pick up this value stock in May.

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