Keep reported and adjusted separate
PepsiCo reported 2025 diluted EPS of $6.00 and core, non-GAAP EPS of $8.14. Read the reconciliation before choosing a denominator. Source 5.
Check Is the difference explained, and might an excluded cost recur?
Compare stocks · four ideas0 of 4 ideas marked read on this device
Free course · Module 6
How to compare two stocks, step by step
Match the numbers, explain the gaps and build a comparison you can check.
Editorial review pending. Author and reviewer attribution await confirmation. · Updated 15 Oct 2026 · How we check lessons
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Idea 1 of 4
Match before you measure.
Compare similar businesses, using the same periods and formulas. A ratio table tells you what to investigate. It does not tell you which stock will perform better.
Start with each company’s annual report. Item 1 describes the business, Item 1A lists risks, Item 7 explains management’s view and Item 8 contains the financial statements. Read the notes as well as the headline numbers. Source 1.
Step 1MatchBusiness, period, currency
Step 2MeasureSame inputs and formulas
Step 3ExplainEvidence, risks, questions
What makes two companies comparable?
Choose businesses with similar products and customers, then check their segments. Coca-Cola sells concentrates and finished drinks; PepsiCo combines food and beverages. Their shared drinks market does not make their cost structures identical. Source 2; Source 3.
Record the exact fiscal year-end, reporting currency and units. A December 31 year and a December 27 year are close, but the dates still belong in your notes. Avoid comparing a full year with a quarter.
Start here
Same period. Same formula. A business model you understand.
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Idea 2 of 4
Compare ratios, then explain the gaps.
A larger business does not necessarily keep more of each sales dollar. In fiscal 2025, PepsiCo reported more revenue, while Coca-Cola had the higher operating margin. The table below uses reported figures and one formula for both companies.
| Measure | Coca-Cola | PepsiCo |
|---|---|---|
| Revenue | $47,941M | $93,925M |
| Operating profit | $13,762M | $11,498M |
| Operating margin | 28.7% | 12.2% |
Coca-Cola says finished drinks generally have lower gross margins than concentrates. PepsiCo’s mix includes a large food business. Those differences help explain why a margin gap needs context; the table alone cannot identify its full cause.
Keep a short comparison checklist
- Growth: revenue this year ÷ last year − 1.
- Margins: gross profit or operating profit ÷ revenue.
- Returns and debt: net income ÷ average equity; debt ÷ equity. Read together, because financing affects returns.
- Cash: operating cash minus capital spending, using the stated free-cash-flow definition.
- Dividends: dividends paid ÷ net income, then check cash coverage.
- Valuation: share price ÷ diluted EPS. Label the price date and the earnings period.
Definitions can vary. Do not compare one company’s adjusted measure with another’s reported measure without explaining the difference.
Read the business
A ratio gap starts a question. It does not settle the comparison.
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Idea 3 of 4
Check what changed the numbers.
One event or a changed definition can alter the picture. Coca-Cola reported $5.3 billion of free cash flow for 2025, and $11.4 billion excluding the $6.1 billion fairlife contingent-consideration payment. Both figures need their labels. Excluding the payment does not mean the cash was never spent. Source 4.
Reported FCF$5.3BAfter the payment
Payment excluded+$6.1BRead the cash outflow
Excluding payment$11.4BDifferent non-GAAP measure
Use one dated share price
For a fixed-price exercise at $155.29, P/E is 25.9 on $6.00 EPS but 19.1 on $8.14 EPS. These are calculations, not current market quotes.
Check A lower multiple caused by a larger adjusted EPS does not prove the stock is cheap.
Read returns with debt and cash
Buybacks and debt-funded distributions can reduce equity and lift ROE without improving operations. A large dividend payout also needs cash support.
Check Review the balance sheet and cash-flow statement before drawing a conclusion.
Keep both views
Explain every adjustment. Keep the original reported figure beside it.
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Idea 4 of 4
Try the ratio, then build your comparison.
Rebuild one ratio before adding more. The practice model starts with the 2025 reported operating-profit and revenue figures above. Change an input to see the arithmetic, then explain what the calculation leaves out.
Compare two operating margins
US dollars · millionsUse the same period and units. Enter negative operating profit for a loss; revenue must be positive.
Operating margins28.7% vs 12.2%Coca-Cola minus PepsiCo: 16.5 percentage points.
Operating profit ÷ revenue × 100. Historical arithmetic only: this model does not rate a company, predict returns or recommend a security.
Open Compare Stocks Side by Side →Try the full comparison routine
- Choose two businesses with comparable products and customers.
- Save each annual report and label the period, currency and units.
- Build the same growth, margin, return, debt, cash and payout measures.
- Add P/E with one price date and a clearly defined EPS period.
- Explain the largest gap using the business description, notes and risk disclosures.
- If you use the live comparison tool, record its timestamp and definitions. Newer prices, periods or formulas may differ from this dated example.
Write one uncertainty that the table cannot answer. Do not turn a tool’s ranking into a buy or sell decision.
Before moving on
Write the biggest gap, the evidence that may explain it and one unanswered question.
Marks Idea 4 read on this device
Quick check
Three quick checks. Feedback straight away.
Question 1 of 3
Coca-Cola’s 2025 gross profit was $29,544 million on revenue of $47,941 million. What was its gross margin?
Choose an answer
Choose an answer to see the explanation.
Why did Coca-Cola show both $5.3 billion of reported 2025 free cash flow and $11.4 billion excluding the fairlife payment?
Choose an answer
Choose an answer to see the explanation.
Using a fixed exercise price of $155.29 for PepsiCo, what is P/E on 2025 core EPS of $8.14 instead of reported EPS of $6.00?
Choose an answer
Choose an answer to see the explanation.
Why read return on equity next to debt?
ROE divides net income by equity. Borrowing to fund distributions or repurchasing shares can reduce equity and raise the ratio without improving the underlying business. Check debt, interest costs and operating cash alongside ROE; a small or negative equity base can make the ratio misleading.
Review your takeaway card and the learning path
- Match first. Check the business model, reporting period, currency and units.
- Measure consistently. Calculate the same ratios using the same definitions.
- Explain the gap. Read notes, adjustments, debt and cash before interpreting a difference.
- Keep questions open. A historical comparison is research, not a prediction or recommendation.
Reading markers and these practice checks stay on this device. They do not mark the LMS lesson complete.
Sources and assumptions
- SEC, How to Read a 10-K. Guide to business, risk, management discussion and financial statements.
- Coca-Cola, fiscal 2025 Form 10-K. Reported revenue, profit, gross margin and business model.
- PepsiCo, fiscal 2025 Form 10-K. Reported revenue and operating profit; food and beverage segments.
- Coca-Cola, full-year 2025 results, February 10, 2026. Reported and fairlife-adjusted free-cash-flow measures.
- PepsiCo, full-year 2025 results, February 3, 2026. Reported and core non-GAAP EPS and reconciliation.
Financial figures are historical, not forecasts. Ratios are calculated from the cited inputs and rounded. The $155.29 share price is a fixed exercise assumption, not a current market quote. Non-GAAP definitions and adjustments require the company’s reconciliation. Local practice does not record a grade or complete the LMS lesson.
StockEducation provides general education, not personal financial, tax or legal advice. Nothing here recommends a specific security. Investing involves risk, including loss of money you invest.
