Keurig Dr Pepper has gotten torched over the last six months - since April 2025, its stock price has dropped 23.2% to $25.80 per share. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Keurig Dr Pepper, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is Keurig Dr Pepper Not Exciting?
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons we avoid KDP and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Keurig Dr Pepper grew its sales at a mediocre 5.9% compounded annual growth rate. This was below our standard for the consumer staples sector.
2. Shrinking Operating Margin
Operating margin is an important measure of profitability accounting for key expenses such as marketing and advertising, IT systems, wages, and other administrative costs.
Analyzing the trend in its profitability, Keurig Dr Pepper’s operating margin decreased by 6.1 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 16.9%.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Keurig Dr Pepper historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.8%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.
Final Judgment
Keurig Dr Pepper isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 12.3× forward P/E (or $25.80 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Keurig Dr Pepper
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