Today, the long-term investing case for Britvic (LSE:BVIC) shares is put under the microscope by two Fools with opposing stances…
Bullish: Christopher Ruane
Warren Buffett has owned shares in Coca-Cola for decades. The business has the hallmarks of a Buffett investment. Demand is robust, unique brands give the company pricing power, and the business does not tie up huge amounts of capital.
Much of the same rationale can be applied to Britvic. Last year, for example, volumes in its UK business grew 6% but revenue was up 15%, underlining Britvic’s pricing power. The company’s stable of brands gives it a point of difference in its market. Capital expenditure last year grew sharply, but was still only around 5% of revenues.
Britvic shares have risen by over a quarter in just over six months. Over five years, the share price has grown 27%. That puts the stock on a price-of-earnings ratio of 17. I do not see that as cheap, but I think it offers reasonable value for a company that has attractive long-term prospects.
Christopher Ruane does not have a position in either of the shares mentioned.
Bearish: Mark Tovey
“A brand is a wonderful thing to own during inflation,” according to Warren Buffett.
After all, it’s easier to hike prices on products that customers are attached to.
Buffett has 8.5% of Berkshire Hathaway’s holdings in Coca-Cola stock.
How much Britvic stock is he holding? Nada.
Admittedly, Britvic is cheap compared to its rivals Coca-Cola and Pepsi as measured by the price-to-earnings ratio.
| Coca-Cola | Pepsi | Britvic | |
| Price-to-earnings ratio | 29 | 28 | 17 |
| Revenue growth over the last five years (2018 to 2022) | 34% | 34% | 8% |
But Coca-Cola and Pepsi’s brands are instantly recognisable to almost everyone on the planet.
By contrast, three-quarters of Britvic’s sales come from the UK, meaning it will follow its home nation’s ups and downs.
Now look at revenue growth. For global juggernauts Coca-Cola and Pepsi, that has been four times faster than for Britvic.
When it comes to a portfolio strategy during inflation, I’d sip on Coca-Cola and Pepsi stock, and leave Britvic to the bees.
Mark Tovey does not have a position in any of the shares mentioned.
