The Smartest Growth Stock to Buy With $1,000 Right Now

Key Points

• Coca-Cola is one of the most important beverage companies in the world.

• The business is executing well, with management providing solid full-year 2025 earnings guidance.

• The stock isn't cheap, but neither is it expensive.

• 10 stocks we like better than Coca-Cola ›

Investors often fall in love with a company's story to the point where they bid the price up to astonishing heights.

Costco (NASDAQ: COST) is a good example. It is a great business that is growing well right now, but the valuation is so rich it probably isn't worth buying.

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Then there are other growth stocks, like Coca-Cola (NYSE: KO), which is performing well, and yet the shares are still attractively priced.

Image source: Getty Images.

Coca-Cola is a well-known giant

Coca-Cola isn't some unknown company; it is one of the most important beverage companies on the planet. It sells its products throughout the world, and its namesake brand is one of the best-known brands on planet Earth. It has industry-leading distribution, marketing, and research-and-development skills. And it can easily act as an industry consolidator, buying up-and-coming competitors to fill out its own brand portfolio.

Much like Costco, which is an industry leader in the club store space, Coca-Cola is a great company. That's highlighted by the fact that Coca-Cola's dividend has increased annually for more than six decades. That makes it a Dividend King, one of a highly elite group of companies that have proven over time they know how to survive through thick and thin.

What's interesting right now is that the consumer staples sector, particularly companies in the food and beverage spaces, are kind of out of favor. There's a shift toward healthier fare, and regulators in the U.S. are getting a bit more stringent with their rules. That has Wall Street a little down on the whole sector, even with regard to companies that are performing relatively well. And Coca-Cola is, indeed, performing well.

In the second quarter, Coca-Cola's organic sales advanced 5%, which is more than twice the pace of PepsiCo (NASDAQ: PEP), the No. 2 beverage maker. Moreover, Coca-Cola updated its earnings guidance, going from growth of 2% to 3% to growth of approximately 3%. That's not a huge change, but it is clear that the business is performing at the high end of the company's own expectations.

Coca-Cola's valuation isn't outlandish

Here's the interesting thing: While Costco's strong recent performance has left it trading with a high valuation, Coca-Cola's valuation is fairly reasonable. To put some numbers on that, Costco's price-to-sales (P/S), price-to-earnings (P/E), and price-to-book value (P/B) ratios are all notably above their five-year averages. The club store retailer has a dividend yield of just 0.6%, which is way below the 1.2% of the S&P 500 index (SNPINDEX: ^GSPC).

Costco is a great growth business, but buying it today is a problem because of the lofty valuation. You have to accept that you are paying a premium if you buy it. But the valuation story around Coca-Cola is different.

Coca-Cola's P/S, P/E, and P/B ratios are all near or below their five-year averages. And the nearly 3% dividend yield is well above the yield you'd collect from an S&P 500 index fund. Sure, peer PepsiCo's valuation is more attractive, but that's because it is performing less well from a business perspective.

Coca-Cola: Growth at a reasonable price

If you are looking for a value stock, PepsiCo will probably be more to your liking. But if you have $1,000 that you want to put to work in a growth stock, Coca-Cola will win out. And it will likely be more attractive than a growth stock that looks a little overextended, like Costco. Put it all together and buying around 14 shares of Coca-Cola, which is what you'll get for $1,000, is likely to be the best option for investors who appreciate growth and reasonable prices.

Should you invest $1,000 in Coca-Cola right now?

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Reuben Gregg Brewer has positions in PepsiCo. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.