Own, of course Cola (WKN: 850663) and Novo Nordisk (WKN: A1XA8R) different business models. Fighting diabetes and thirst can be like curing a ‘disease’ in a way. Although there is a clear focus on consumer goods and a focus on pharmaceuticals.
Despite this, Coca-Cola and Novo Nordisk have three things in common. Or their stocks and companies. Let’s take a closer look at it.
Coca-Cola & Novo Nordisk: Strong business models
My first guess is that both Coca-Cola and Novo Nordisk have strong business models. It can largely be the basis of their success. The American beverage company is the best known of its kind and the brand is the best in this field. This now enables a lot of pricing power, but also a wide range of consumption around the world.
On the other hand, the Danish pharmaceutical group may not be known to many by name. But those who have diabetes and need regular injections should take a look at their pens. The probability that the name Novo Nordisk appears here is very high. The group is considered a leader and has been around for decades in the fight against diabetes. The management is now also making a name for itself in obesity and other diseases associated with these diseases.
Quality is therefore common to both stocks. Both also serve more defensive and non-cyclical markets. That makes Novo Nordisk and Coca-Cola shares quite attractive.
Not exactly cheap…
Yet Novo Nordisk and Coca-Cola also have something in common when it comes to valuations. However, they are not exactly cheap. The pharmaceutical group is even more ambitious. Here, the starting point is a price-earnings of around 32 and a dividend of 1.3%. Undoubtedly, quality comes at a higher price. Even for a Dividend Aristocrat with a strong and growing payout, that’s pretty ambitious.
Coca-Cola is actually the cheaper representative here. The price-earnings ratio should tend to be around 25 for the current fiscal year. There is also a 2.8% yield, which seems a bit cheaper. But you don’t pay very little for the dividend king either.
However, Novo Nordisk and Coca-Cola have both presented themselves as strong, reliable dividend stocks. The quality is partly worth the price. But there is one ingredient that should definitely not be missing, otherwise it can become difficult.
Coca-Cola and Novo Nordisk: dependent on growth
Coca-Cola and Novo Nordisk shares absolutely need growth given their ambitious valuations. Fortunately, they also deliver. Although we can say one thing: Both have the opportunity to create growth through pricing power. The strong business models and brands and the competitive positions in their markets make this possible.
There are also individual paths to growth. For example, Coca-Cola focuses on new beverages and no longer takes the bottling business into its own hands. This increases pricing power compared to bottlers and potentially opens up new markets.
Novo Nordisk, on the other hand, can rely on the moderate growth market for diabetes in addition to pricing. Unfortunately, the number of patients is gradually increasing. But as said, both stocks also need the gains to justify their valuations.
Coca-Cola & Novo Nordisk: The article on 3 similarities first appeared on The Motley Fool Germany.
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Vincent owns shares in Coca-Cola and Novo Nordisk. The Motley Fool recommends Novo Nordisk and the following options: long January 2024 $47.50 calls on Coca-Cola.
Motley Fool Germany 2022