The Pepsi Bottling Group, Inc. (PBG)

Pepsi Bottling Group Inc. (PBG) is the bottler for Pepsico Inc. (PEP). It has an attractive price-to-sales ratio of 0.57 ttm and a price-to-earnings ratio of only 14.83, as compared with Coca-Cola Bottling Co. Consolidated (COKE), which boasts a P/E ratio of 22.24 but lower quarterly revenue and earnings growth and Coca-Cola Enterprises, which is losing money. Its return on equity is above 25%, clocking in at 25.30% and its return on assets is 5.77%. The company has $2.78 a share in cash and its debt/equity is at a solid ratio of 2.461, as bottling is a capital-intensive industry.

The company has great cash flows. It's operating cash flow is $1.23B with a levered cash flow of $318M. The company is half-owned by Pepsico Inc. (PEP) with the rest owned by respectable investors such as Putnam Investment Management, LSV Asset Management and Janus Capital Management. The company's total current assets have been growing at a rate of 16.13% on average since the fiscal year ending in December 31, 2004. Despite a jump in short-term debt in 2005, the company has only grown in liabilities by 9.91% a year. The stock has increased stockholder equity by 2.31% from December 31, 2004 to December 31, 2006. Its enterprise value is $11.75 billion, as opposed with its market capitalization of $7.25 billion (as of April 10, 2007), creating a discrepancy of 62.07% in valuation differences.

As Pepsico continues to grab market share from Coca-Cola Co. (KO) and strengthen its brands, Pepsi Bottling Group will stand to benefit. As of recent, Pepsico's market capitalization is only $12 billion away from Coca-Cola's. In 2005, Pepsi's market capitalization briefly eclipsed Coke's. Pepsi is innovating in expanding markets such as bottled water and sports drinks, which is benefitting Pepsi Bottling Group. With market share still to grab and with Pepsi being on the cutting edge of new beverage industires, all I can see for Pepsi Bottling Co. is gold.