PepsiCo looks undervalued — $178 per-share value versus $124 market price, forward P/E about half Coca-Cola's, extremely negative sentiment. He would pick PepsiCo over Coca-Cola for now and calls both buying opportunities, despite PepsiCo's structural headwinds and slower expected revenue growth than Coca-Cola's.

Comparing Coca-Cola and Pepsi-Cola is an interesting matter. They offer similar products to the same customer groups and in similar regions of the world.

However, Coca-Cola shares are trading near their highest level in 52 weeks, while Pepsi-Cola shares are trading near their lowest level in 52 weeks. I found this situation really interesting, so I wanted to make a direct comparison and share with you the differences between these two companies, the reason for the large discrepancy in their valuations, and which one I see as a better buy today at current market prices.

Both have achieved strong revenue growth since economic reopening, but Coca-Cola's growth has been more pronounced. It wasn't great for Pepsi-Cola, as it benefited during the stay-at-home phases of the pandemic thanks to its booming snack sector, as people were spending more time at home.

They ate snacks frequently and consumed Pepsi Cola drinks more often. Overall, Pepsi-Cola's revenue is larger than Coca-Cola's due to its strong snack business, but revenue growth has been better for Coca-Cola,

and I expect Coca-Cola's revenue growth to continue to be better than Pepsi-Cola's over the next three years. One of the biggest differences you will notice between them is in profitability, and this has been the biggest complaint of Pepsi-Cola stock investors who urge the management team to work with a model similar to Coca-Cola's, because Coca-Cola achieves significantly better profitability.

With profit margins approaching 32%, Coca-Cola's margins are nearing record levels and are more than double those of Pepsi-Cola.

Coca-Cola's profit margin has improved from 20% to 32%, while Pepsi-Cola's margins have declined from 17% to 15.5 % over the past decade.

This has resulted in outstanding profit margin performance for Coca-Cola, and it's not limited to the three or six months in which Coca-Cola outperformed Pepsi.

Rather, it is over the past decade, and you can clearly see that difference in the graph. Over the course of the entire decade, Coca-Cola outperformed Pepsi-Cola in operating profitability.

When measured based on returns on invested capital, which takes into account the amount of capital a company invests and the return on that investment, it provides a more accurate performance comparison .

However, in recent years Coca-Cola has been ahead by 17.9% compared to 14.5% for Pepsi-Cola.

In addition , since 2020, Coca-Cola's performance has been improving while Pepsi-Cola's performance has been fluctuating and declining.

At the same time, you find that salty snacks and sugary Pepsi-Cola drinks are at a disadvantage when thinking about grocery shopping or when thinking about what you consume while at home, as you are more likely to choose that healthier option, which represents consumer preference.

She stated that there are two major differences between Coca-Cola and Pepsi-Cola. One of them is the operating profit margin . The other is valuation when measured based on the future price of earnings.

You can see that gap widening this year as Coca-Cola's valuation has improved to a forward price-to-earnings ratio of 24, while Pepsi-Cola is trading at a valuation that is cheaper and cheaper.

In fact, Coca-Cola is trading near its cheapest valuation ever when measured on a futures basis for earnings. It is certainly close to its cheapest level since late 2023. It is trading at a forward price-to-earnings ratio of just 13.9, which is roughly half the valuation of Coca-Cola.

I did a similar calculation for Pepsi-Cola and found that the value of this company is $178 per share, while the current market price is only $124 per share.

So, no matter how I measure Pepsi-Cola, it appears to be undervalued given its structural headwinds in the near and long term. Investor sentiment is extremely negative towards Pepsi Cola.

So, if I had to choose between these two outstanding companies, I would choose Pepsi-Cola for the time being. However, I classify both as buying opportunities. I think the risk-to-reward ratio is attractive in both companies.