PepsiCo's Valuation Is Looking 25% Sweeter Compared To Coca-Cola

PepsiCo (PEP) has seen its valuation decline significantly, with its TTM P/E falling from 31.5x to 18.5x, rendering it more attractive than Coca-Cola (KO) at 24.1x P/E and offering a 3.9% dividend. While Q2 2025 results showed flat organic revenue and a 5% EPS decline, PEP's diversified global revenue base supports a 6.7% long-term growth outlook, contributing to a superior 2.77x PEG ratio compared to KO's 4.38x.

Analysis

PepsiCo, Inc. (PEP) has experienced a significant valuation de-rating, with its trailing-twelve-month P/E ratio contracting from 31.5x to a more compelling 18.5x. This positions the company favorably against its primary competitor, Coca-Cola (KO), which trades at a 24.1x P/E ratio. The valuation gap is further highlighted by PepsiCo's superior Price/Earnings-to-Growth (PEG) ratio of 2.77x versus Coca-Cola's 4.38x. Complementing the valuation case is a 3.9% dividend yield, offering a substantial income component. However, this attractive entry point is contrasted by recent operational weakness, as evidenced by flat organic revenue growth and a 5% decline in earnings per share (excluding impairments) in the most recent quarterly results (Q2 2025). Despite this near-term softness, the company's long-term outlook is supported by a projected 6.7% revenue growth rate, driven by a diversified global portfolio.

Key Decisions for Investors

• Investors should consider the significant valuation compression in PEP, which now trades at a notable discount to KO on both P/E and PEG metrics, presenting a potential relative value opportunity.
• The attractive 3.9% dividend yield provides a strong income-oriented buffer, but this should be weighed against recent operational headwinds, including flat organic revenue and a 5% decline in core EPS.
• For long-term investors, the current valuation may offer a favorable entry point to capture the projected 6.7% long-term revenue growth, provided they can tolerate potential near-term volatility stemming from recent performance.