Will these US beverage stocks lag their industry as Americans cut sugar?

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By Mary-Lynn Cesar for Kapitall.

Former New York City Mayor Michael Bloomberg can rejoice (well, kinda): a new  Gallup poll  finds most Americans are likely to skip soda and sugar these days. According to the poll, 63% of Americans stated they actively try to avoid soda while 52% said they actively try to avoid sugar.

The results reveal an increase in this aspect of health-consciousness, rising significantly from responses given in a 2002 dietary choices survey. Back then, 41% and 43% of Americans said they actively tried to avoid soda and sugar, respectively. 


However, despite the fact that Americans are growing much more likely to pass on sweets and sugary drinks, the public has yet to fully embrace a healthy lifestyle. Fewer than half of Americans make a concerted effort to reduce their salt intake, and, as Gallup points out, although over 90% of Americans include fruits and vegetables in their daily diets, there's no guarantee they're doing so in a healthy way. 

Nevertheless, since Americans appear to be slowly ditching unhealthy habits, we decided to run some screens related to corporate health. We began with a universe comprised of stocks belonging to the beverages - soft drinks, farm products, and food - major diversified industries. Then we screened for stocks with a  return on assets (ROA) lower than the industry average on a trailing twelve month ( TTM ) basis .

ROA is a profitability metric that analyzes a company's ability to use its assets-a company's debt and equity-to generate earnings, and it is calculated by dividing net income by total assets. When a company has a high ROA, it means the firm is able to use its assets to make more money on less investment. Therefore, having an ROA lower than the industry average means that a company earned less profit on the resources it owns than an average company in its industry. 

Next, we looked for stocks with a  return on equity (ROE) lower than the industry average on a TTM basis . ROE shows how effective a company is at using investor money to generate profit. It is calculated by dividing net income by shareholder equity. A company with an ROE below the industry average isn't as adept at using investors' money to make money.

After that, we screened for stocks with a  return on investment (ROI) lower than the industry average on a TTM basis . ROI is a metric that lets investors figure out the profitability of an investment by dividing the benefit of said investment (gain from investment - cost of investment) by the cost of said investment. In the formula, gain from investment is the money an investor earns from selling the investment. 

If a company has an ROI lower than the industry average, it indicates that the stock isn't as profitable an investment as many of its peers. 

Finally, we looked for stocks with  growth in revenue lower than the industry average on a TTM basis . This means that the companies aren't as effective at selling their inventory, which is a challenge soft drink manufacturers have encountered recently. 

We were left with two US beverage stocks on our list. Do you think Americans' changing dietary habits are behind their low ROA, ROE, ROI, and revenue growth? Use this list as a starting point for your own analysis, and let us know what you think in the comments. 

Click on the interactive chart to view data over time. 

1. Coca-Cola Botting Co. Consolidated ( COKE , Earnings , Analysts , Financials ): Engages in the production, marketing, and distribution of nonalcoholic beverages, primarily products of The Coca-Cola Company. Market cap at $657.06M, most recent closing price at $70.88.

TTM Return on Assets at 1.93% vs. an industry average at 9.83%. TTM Return on Equity at 14.47% vs. an industry average at 25.18%. TTM Return on Investments at 3.12% vs. an industry average at 13.59%.

TTM Revenue Change at -1.58% vs. an industry average at 4.57%.

2. Cott Corporation ( COT , Earnings , Analysts , Financials ): Engages in the production and distribution of retailer brand beverages in North America and internationally. Market cap at $647.02M, most recent closing price at $6.81.

TTM Return on Assets at 0.88% vs. an industry average at 9.83%. TTM Return on Equity at 2.19% vs. an industry average at 25.17%. TTM Return on Investments at 1.1% vs. an industry average at 13.59%.

TTM Revenue Change at -7.55% vs. an industry average at 4.66%.

(List compiled by Mary-Lynn Cesar. Accounting data sourced from Google Finance. Monthly return data sourced from Zacks Investment Research. Revenue and ROE data sourced from Fidelity. All other data sourced from finviz.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

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