Coca-Cola (KO) or PepsiCo (PEP): one side is winning

2026-09-16 · By Lubin Danilo, founder of Lubin Investment

Coca-Cola is up 29% in 2026 on a one-off World Cup effect, while PepsiCo is down 2% on a Frito-Lay slowdown. My screen scores them almost the same (6/10 versus 5/10), but my model flags both stocks as overvalued, for opposite reasons: an already-rich price for one, growth that is too weak for the other.

Why has the market stopped treating Coca-Cola and PepsiCo the same way?

Coca-Cola and PepsiCo have sold sugary drinks on the same supermarket shelves for a century, yet their stocks just took two opposite paths. Since January 1, 2026, Coca-Cola (KO) has gained roughly 29%, while PepsiCo (PEP) is down 2% and trading near its 12-month low. My 10-criteria quality and valuation screen scores the two companies closely (6 out of 10 for Coca-Cola, 5 out of 10 for PepsiCo), a gap far too small to explain such a stock-price divergence on its own.

The real explanation fits in one word for each: Coca-Cola is riding an exceptional one-off catalyst, the FIFA World Cup, while PepsiCo is absorbing a more structural slowdown in its US snacking division. Two very different stories hide behind two close quality scores, and that is exactly the kind of gap my method is built to clarify: separating market narrative from what the numbers actually say.

Where does Coca-Cola's historic volume growth come from?

Coca-Cola reported in late July its strongest quarterly volume growth in 17 years (+5%), driven by the FIFA World Cup: the effect on beverage consumption at gathering venues and points of sale exceeded the company's own internal expectations. Revenue jumped 7% to $13.38 billion, and the group raised its full-year EPS growth guidance to 9-10% (the full breakdown of that quarter is in my dedicated Coca-Cola analysis).

But a global football tournament does not repeat every quarter. The market seems to have extrapolated a one-off catalyst into a lasting trend: the stock jumped 6% on the day of the release and has kept climbing since, right as Coca-Cola announced a $10 billion US investment plan through 2030, a signal of confidence in domestic demand rather than just a World Cup bounce. Still, the third-quarter growth comparison against this exceptional second quarter will mechanically be much tougher.

Why is Frito-Lay dragging PepsiCo down?

PepsiCo reported more mixed results on July 9: revenue of $24.18 billion (+6.4%) that beat consensus, but earnings per share of $2.20 slightly below expectations. The real problem is not the headline number, it is its geographic split: international volumes are growing (+3% for snacks, +2% for beverages), but in the US, the Frito-Lay division (Lay's, Doritos, Cheetos, Tostitos) is flat, despite price cuts of up to 15% on those same brands to try to reignite demand (I already went into that quarter's detail in my dedicated PepsiCo analysis).

Part of the industry links this slowdown to the rise of GLP-1 drugs (Ozempic and its equivalents): adoption rose from 9% to 21% of US households between January 2025 and May 2026, and part of the trade press documents a snack market slowing as a result. CEO Ramon Laguarta pushes back: he says he does not see a “direct” impact from these drugs on sales, and instead points to a US consumer under broader budget pressure. The two explanations are not mutually exclusive, and it is precisely this uncertainty over the cause that weighs on the stock: the market does not like not knowing whether a problem is temporary or structural.

What does my quality screen say about each of them?

My 10-criteria screen currently validates 6 out of 10 criteria for Coca-Cola and 5 out of 10 for PepsiCo (see Coca-Cola's full profile and PepsiCo's), two average scores that hide very different profiles. Coca-Cola posts a comfortable net margin of 28.6%, versus 10.8% for PepsiCo, nearly three times less. The reason is a structural mechanism: Coca-Cola sells the concentrate and owns the brand, but hands most bottling plants and physical logistics to partner bottling companies, a franchise model that considerably lightens costs and capital needs. PepsiCo, by contrast, directly owns a large share of its snack and beverage plants: a more integrated model, with more control, but also more fixed costs to absorb when volumes stall.

The same mechanism explains another glaring difference: Coca-Cola's net debt is repayable in 2.49 years of free cash flow (my tolerance threshold is 3 years, so it passes), versus 4.79 years for PepsiCo, flagged as high by my screen. A lighter balance sheet, inherited from the franchise model, gives Coca-Cola more financial flexibility. Both companies fail the same two criteria, though: their 5-year sales growth sits below my 10%-a-year threshold (5.1% for Coca-Cola, 3.7% for PepsiCo), and their margins are compressing rather than expanding, a sign that costs (ingredients, logistics, marketing) are growing faster than revenue at both.

Criterion	Coca-Cola (KO)	PepsiCo (PEP)
Quality score (out of 10)	6/10	5/10
Net margin	28.6%	10.8%
Current P/FCF	31.0x	20.7x
Reasonable buy price vs price	$10.74 vs $88.71 (87.9% premium)	$64.56 vs $135.50 (52.4% premium)
Net debt (years of FCF)	2.49 years	4.79 years
Sales growth (5 years)	5.1%/yr	3.7%/yr
Stock performance YTD (09/14/2026)	+29%	-2%

Is the cash they generate equally reliable?

A single free-cash-flow-margin number says nothing without its trajectory. Rebuilding the last four trailing quarters over the past two years from the site's public data, PepsiCo tells a simple, positive story: its FCF margin rose from 7.3% two years ago to 9.6% today, a steady improvement despite Frito-Lay's struggles. The group is generating, proportionally, a bit more available cash than before, even in the middle of a volume slump.

Coca-Cola tells a much choppier story: its trailing quarterly FCF margin went from negative (-2.0%) a year ago to 25.5% today, with sharp troughs and spikes in between. This is not a sign of operational instability, it is the consequence of the same franchise mechanism described above. One-off divestitures and buybacks of bottler stakes move large amounts of cash on and off the balance sheet in lumps, which makes any single-quarter reading misleading for this specific stock. Coca-Cola has to be read on annualized cash, never on one quarter alone.

Which of the two is pricier according to my model?

On the raw ratio, Coca-Cola trades at 31.0 times its annual free cash flow, versus 20.7 times for PepsiCo (my tolerance threshold is 25 times): PepsiCo looks, at first glance, notably cheaper. My July analysis already placed Coca-Cola's multiple at the 86th percentile of its own 5-year history, meaning it was more expensive than 86% of trading days over that period: near the priciest this specific stock has ever been. Today's multiple (31.0 times) is nearly identical to July's (31.1 times), despite a stock that kept climbing since then: the market is still paying a near-record premium for Coca-Cola.

But my reasonable-buy-price model, which projects the actual five-year cash-per-share trajectory rather than trusting a single day's ratio, nearly flips the ranking. For PepsiCo, it comes out at $64.56 against a price of $135.50, a 52.4% premium: the ratio may look reasonable, but the model penalizes a company whose cash per share is growing barely faster than inflation (+6.2%/year), after years where even revenue stalled below 4% a year. For Coca-Cola, the raw calculation comes out at just $10.74, an extreme figure that needs the same caution I already flagged in July: the five-year comparison base is distorted by the bottler stake divestitures and acquisitions mentioned above, which shift the free-cash-flow-per-share perimeter from one year to the next. For this specific stock, I prefer to trust the percentile signal (expensive versus its own history) over this raw calculated price.

What could derail each of the two theses?

For Coca-Cola, the most concrete risk is reliance on a catalyst that will not repeat: without a World Cup in the third quarter, the growth comparison will mechanically be much tougher, and a stock that just climbed 29% on the promise of a lasting momentum has a lot to lose if growth falls back to its normal 1-2%-a-year pace. There is also a deeper regulatory risk: political and medical pressure against added sugar keeps rising in several developed markets.

For PepsiCo, the central question is whether the Frito-Lay slowdown is temporary or structural. If the 15% price cuts genuinely reignite volumes in coming quarters, a stock already near its one-year low could offer a real entry point. But if GLP-1 drug adoption keeps rising at the pace seen since January 2025, the problem is not a poorly calibrated price cut: it is a lasting shift in demand for an entire product category, one that will hit other snacking giants too, not just PepsiCo.

So which one should you pick, according to my method?

My method says neither “buy Coca-Cola” nor “buy PepsiCo”: it says both, today, trade above my reasonable buy price, for two opposite kinds of problems. Coca-Cola is the stronger business of the two on paper (margin, balance sheet, capital-light franchise), but its price already bakes in an exceptional quarter that is unlikely to repeat identically. PepsiCo shows a more modest ratio and an already-deflated price, but faces a genuine question about the durability of its demand, not just a rough quarterly headline.

Coca-Cola (score 6/10) is up 29% since January on a one-off World Cup effect, at 31.0 times its annual free cash flow, near its priciest ever; PepsiCo (score 5/10) is down 2%, at 20.7 times its FCF, a more modest ratio penalized by weak growth.
Coca-Cola's lighter balance sheet (debt repayable in 2.49 years of FCF) comes from its bottler franchise model; PepsiCo's heavier one (4.79 years) comes from its integrated model, which directly owns its plants.
PepsiCo's cash margin is steadily improving (from 7.3% to 9.6% in two years) despite Frito-Lay's woes; Coca-Cola's is erratic quarter to quarter because of bottler-stake movements, and only reads cleanly on an annualized basis.
My reasonable-buy-price model finds both stocks overvalued (87.9% for Coca-Cola, 52.4% for PepsiCo), for opposite reasons: an already-expensive multiple for one, growth that is too weak for the other. This is not investment advice, do your own research.

FAQ

Coca-Cola or PepsiCo, which one scores better on my site?

Coca-Cola validates 6 out of 10 criteria in my screen, versus 5 out of 10 for PepsiCo, mainly thanks to a much higher net margin (28.6% versus 10.8%) and a lighter balance sheet, inherited from its bottler franchise model.

Is PepsiCo really cheaper than Coca-Cola in the market?

On the raw ratio, yes: PepsiCo trades at 20.7 times free cash flow versus 31.0 times for Coca-Cola. But my reasonable-buy-price model, which factors in growth trajectory, judges both stocks overvalued relative to their current price.

Why has Coca-Cola stock risen so much in 2026?

Driven by its strongest quarterly volume growth in 17 years (+5%), attributed to the FIFA World Cup's effect on beverage consumption, Coca-Cola is up roughly 29% since January 1, 2026.

Is PepsiCo's slowdown linked to GLP-1 drugs?

That is one explanation raised by part of the industry, with GLP-1 adoption rising from 9% to 21% of US households between January 2025 and May 2026. PepsiCo's CEO says he does not see a direct impact and instead points to a consumer under budget pressure.

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).