Key Points
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Coca-Cola’s growth rate has been improving in recent quarters.
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The stock has been soaring this year, and its valuation is a bit pricey.
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Expectations could be elevated heading into the release of the latest earnings numbers.
- 10 stocks we like better than Coca-Cola ›
Shares of Coca-Cola (NYSE: KO) have been on a tear this year, rising by nearly 20% thus far. The stock hit a new all-time high on Monday as investors continue to load up on the beverage giant.
The stock’s valuation is high, and the company reports its second-quarter earnings later this month, on July 28. Is the stock a good buy before it posts its latest numbers, or has it gotten too expensive?
The company’s growth has been impressive, but it comes with an asterisk
Coca-Cola’s recent results have been encouraging, with the company’s growth rate accelerating and even getting back into double digits. The improved numbers may, however, have set an elevated bar for the beverage company leading into its upcoming earnings report.
While Coca-Cola’s net revenue rose by 12% during the first three months of 2026, investors also shouldn’t forget that they were down 2% a year earlier. Thus, the company was going up against some soft comparables, which can sometimes paint a bit of a misleading picture as to how well the business is truly doing. However, with the second quarter of 2025 also being an underwhelming period where sales were up by just 1%, it may not be all that surprising if Coca-Cola shows another strong quarter of growth when it posts its latest numbers this month.
The trouble is that Coca-Cola is not what you’d consider to be a top growth stock, yet it has been trading like one of late.
Coca-Cola’s high valuation highlights risks for investors
Coca-Cola has a fantastic business, and it generates terrific margins, but that doesn’t mean that it’s worth paying a big premium for. But with it trading at 26 times its trailing earnings, that’s arguably what investors who buy the stock today are doing. This is even higher than the 25 times earnings that the average stock in the S&P 500 trades at.
Another downside of buying the stock at its high is that its dividend yield has fallen to just 2.5%. At that level, there are many other dividend stocks to choose from that may offer comparable yields, have more long-term growth potential, and are more reasonably valued.
There’s nothing wrong with Coca-Cola as a business, but the stock is arguably far too expensive to be a good buy at its current levels. And unless the company completely blows past earnings expectations in the current quarter, I wouldn’t be surprised to see the stock fall after it posts its latest numbers.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
