Is Keurig Dr. Pepper A Buy After Strong Earnings?

With new cases of the coronavirus spiking in the US and worldwide .

With the already historic unemployment levels and job losses in recent months .

With massive uncertainty in hospitalsbanks, and other industries.

And with many Blue Chip stocks looking vulnerable when they’re supposed to be among the best areas to invest your capital.

There are few safe places to invest today. And this number grows smaller every day this crisis lasts.

The key to continue compounding your investments and build wealth is to keep investing well over time.

This is a huge part of things.

But another huge part of this that few think of is losing as little capital as possible.

The fewer investment losses you have the more capital you keep. And the more capital you keep the faster you achieve your retirement goals.

To help you avoid bad investments, in recent articles I’ve shown you several stocks to avoid buying…

Today, I answer the question – Is Keurig Dr. Pepper A Buy After Strong Earnings? 

Keurig Dr. Pepper (KDP) is the result of a 2018 merger between Keurig Green Mountain and Dr. Pepper Snapple.

It’s the 3rd largest nonalcoholic beverage company in North America.

And here are some of its powerful brands.

  • Green Mountain
  • Krispy Kreme Doughnuts Coffee
  • 7Up
  • Dr. Pepper
  • Snapple
  • Evian
  • Sunny D

And more.

It’s based in Burlington Massachusetts.  It has a $38.1 billion market cap. And it pays a 2.2% dividend, which is reason #1 to consider buying its stock.

KDP’s 2.2% Dividend

Over the last decade KDP’s paid out a total of $14.47 per share in dividends.

At today’s count of 1.421 billion shares that’s equal to $20.56 billion paid out to shareholders in the last decade.

These dividend payments help you earn cash now if you take the money out.  Or allow you to buy more shares over time if you reinvest the dividends.

Both help you earn higher investment returns.

It can do this because it earns huge profits and cash flows.  Which is reason #2 to consider buying KDP before its spin off.

KDP Earns Huge Profits

Over the last decade it earned an average operating income margin of 19.2% per year.

I look for anything above 10%.

Another way to show this is with its free cash flow to sales ratio (FCF/Sales). Over the last decade its 15.5% per year on average.

I call this the “Cash Machine” metric.

Why do I look for these specific targets?

Because after evaluating thousands of companies over my 14-year career, I estimate fewer than 5% of all companies worldwide surpass these thresholds.

KDP surpasses my thresholds on both important metrics and that makes it an incredibly safe and valuable investment.

But is it cheap?


With the markets at or near all-time highs you’d expect a fantastic stock like KDP to be selling at an enormous valuation.

And unfortunately, it is overvalued.

As of this writing its P/E is 29.7.

Its P/CF is 16.4.

Its forward P/E is 17.3.

And its enterprise value to operating income – EV/EBIT is 22.3.

On all three metrics at the top I look to buy investments below 20 to consider them undervalued.

And on EV/EBIT I look to buy stocks below 8.

These show that KDP is overvalued right now.

And this means buying its stock does not give you a margin of safety in investing terminology.

When you invest in stocks that have a margin of safety it makes the investment safer.  And it also means you should expect to earn higher returns owning it in the coming years.

The inverse of this is also true…

When you invest in a stock without a margin of safety it makes the investment riskier.  And it also means you should expect to earn less owning its stock going forward.

With KDP being overvalued it makes the investment riskier.

Should You Own Keurig Dr. Pepper After Its Strong Earnings?

On October 29th, KDP announced strong earnings and said it expects its 2020 full year results to remain strong.

Even with this though KDP is overvalued right now. For this reason, I recommend you wait to buy it.

If you’re looking for a solid, safe, stable, huge dividend paying, and enormously profitable investment to buy to Depression Proof Your Portfolio – consider investing in KDP…

But only when it’s cheaper.

Click here to see some of the stocks we recommend to Depression Proof Your Portfolio.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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