Keurig Dr Pepper Inc – KDP (US)
Price: 22.8 USD as of 31 Aug 2018
Looks like an outstanding stock to invest in based on many value investing criteria. Some of the key stats are listed below to help you get started in researching this company.
In brackets besides some of the numbers are remarks suitable for investors looking to buy (i.e. long) or hold the stock.
The question that we have in mind is: With all dividends re-invested, can this stock holding double in value (total returns of 100%) in 5 years or less? If yes, that would give us a CAGR of 15% or more – a very healthy number.
Industry: Non-alcoholic Beverages
City of Domicile: Burlington
Market Cap: 31.6 billion USD
Enterprise value: 35.96 billion USD (the lower this number, the better)
Price to Earnings: 5x (very good)
Price to Diluted Earnings Per Share (EPS): 3.74x (very good)
5 year average price to earnings: 20x (very good, compared to current – which is much lesser)
Price to Cash Flow: 3.9x (very good)
Price to Book: 1.51x (good)
Price to Sales: 0.60x (good)
5 year average return on equity: 42% (very good)
3 year average return on assets: 10% (good)
Diluted EPS 5 year average growth: 14% (good)
Retention Ratio: 61% (good)
Dividend Yield: 2.4% (good)
Sustainable growth rate*: 29% (good)
Net margin 5 year average: 15% (good)
Current Ratio: 0.9
Quick Ratio: 0.6
Debt to Assets: 44.5% (acceptable)
10 year annualized total return: 20.7% (very strong)
5 year annualized total return: 26.7%
One thing we notice is, is that with all other factors unchanged, if the market prices this stock at a P/E of 10 only (half of its historic P/E), the price should double.
Regarding “margin of safety”, we selected this stock because it is not very highly leveraged (geared, indebted) and it is an established brand in a relatively unchanging industry, unlike internet or biotech companies.
What do you think about KDP? Is it a smart investment today? Do leave your observations and opinions in the comments below.
Sam Wadia, MCom, ChFC
(1) Sustainable Growth Rate is a measure of how much a firm can grow without borrowing more money.
(2) Do not buy or sell anything unless you fully understand it. Get written consent from your qualified financial advisor before making any money decision.
(3) Historic performance is no guarantee of future returns.