Consumer Staples ROIC Rankings: Why the Lowest-ROIC Stock Has the Best Trajectory
CL has the highest ROIC (34.4%), yet PG—with the lowest ROIC (23.9%)—shows the strongest improvement trajectory (+21.6% over 8 quarters). Meanwhile, KO's superior cash generation masks a $12 billion tax liability. Here's how to read beyond the headline metrics.
Consumer Staples ROIC Rankings: Why the Lowest-ROIC Stock Has the Best Trajectory
Last Updated: January 25, 2026 Data Currency: Q2 FY2026 for PG (Jan 2026), Q3 2025 for KO/CL/PEP (Oct 2025). PG, KO, CL, PEP
Colgate has the highest ROIC. Procter & Gamble has the lowest. But trajectory tells a different story—and Coca-Cola's hidden $12B liability changes the risk picture entirely.
Capital Efficiency Rankings:
- CL: 34.4% ROIC* (highest), 8/10 earnings quality, Moderate risk
- KO: 28.2% ROIC, 6/10 earnings quality, HIGH hidden liability risk ($12B tax)
- PEP: 25.9% ROIC, 7/10 earnings quality, Low risk (cleanest balance sheet)
- PG: 23.9% ROIC (lowest), +21.6% 8Q improvement (fastest trajectory)
*CL uses standard ROIC (asset-based unavailable)—may not be perfectly comparable.
The counterintuitive finding: the stock with the lowest current ROIC may be the most interesting—improvement trajectory often matters more than level.
- ROIC Rankings: CL 34.4%* > KO 28.2% > PEP 25.9% > PG 23.9%
- ROIC 8Q Trajectory: PG +21.6% (improving) > KO +17.9% > PEP +0.2% (flat)
- FCF Margin: KO 36.6% > CL 21.6% > PG 18.8% > PEP 14.5%
- Gross Margin: KO 61.5% > CL 59.4% > PEP 53.6% > PG 51.4%
- Earnings Quality: CL 8/10 > PG 7/10 = PEP 7/10 > KO 6/10
- Hidden Liabilities: KO HIGH ($12B tax), PG Moderate ($124M tax), CL Moderate, PEP Low
- Volume Trends: All negative—PG -1%, CL -1.5%, PEP declining in key markets
Sources: Company 10-Q filings, BigQuery computed metrics, SEC EDGAR
MetricDuck tracks ROIC, margins, and 8-quarter trends across 1,000+ companies. Compare PG vs KO vs CL vs PEP →
The Headline Numbers Miss the Story
Every consumer staples comparison starts the same way: "Colgate has the highest ROIC." "Coca-Cola generates great cash flow." "P&G is the dividend aristocrat."
These statements are all true. They're also incomplete.
| Company | PG | KO | CL | PEP |
|---|---|---|---|---|
| ROIC | 23.9% | 28.2% | 34.4%* | 25.9% |
| ROIC 8Q Trend | +21.6% | +17.9% | n/a | +0.2% |
| P/E (TTM) | 22x | 22x | 26x | 21x |
| FCF Margin | 18.8% | 36.6% | 21.6% | 14.5% |
| Gross Margin | 51.4% | 61.5% | 59.4% | 53.6% |
| Earnings Quality | 7/10 | 6/10 | 8/10 | 7/10 |
| Hidden Liab. Risk | Moderate | HIGH | Moderate | Low |
*CL ROIC uses different methodology (standard vs asset-based)—see methodology section.
The data reveals a more nuanced picture:
- CL leads on capital efficiency, but its ROIC is stable—no improvement trajectory
- KO generates 2x the FCF margin of PG, but carries $12B in hidden tax liability risk
- PG has the lowest ROIC, but is improving fastest (+21.6%)—trajectory vs level tension
- PEP has the cleanest balance sheet, but the weakest FCF margin and flat ROIC trajectory
Why Does Procter & Gamble Have the Lowest ROIC?
P&G's 23.9% ROIC trails peers by 10+ percentage points. This isn't because P&G is a bad business—it's because of how capital efficiency interacts with brand portfolio breadth:
The Diversification Tax
P&G operates across 5 distinct business segments spanning 10 product categories. This diversification requires:
- More inventory (different SKUs, different supply chains)
- More fixed assets (different manufacturing processes)
- More working capital (different retail partnerships)
Compare to Colgate: 78% of revenue comes from Oral Care (44%) and Pet Nutrition (22%)—a much more focused capital deployment.
"Beauty segment net sales increased 5% driven by volume, pricing, and FX, despite unfavorable mix... Baby, Feminine & Family Care decreased... Fabric & Home Care was unchanged." — P&G Q2 FY2026 10-Q
This segment divergence (Beauty +3% volume while Baby/Family -5% volume) illustrates the capital allocation challenge: P&G must allocate capital across segments with dramatically different trajectories.
But Trajectory Matters More Than Level
Here's why the lowest ROIC stock might be the most interesting:
| Company | ROIC Start (8Q ago) | ROIC Now | Change | Interpretation |
|---|---|---|---|---|
| PG | ~19% | 23.9% | +4.9pp | Meaningful improvement |
| KO | ~24% | 28.2% | +4.2pp | Improving |
| CL | ~34% | 34.4% | ~0pp | Stable (at high level) |
| PEP | ~26% | 25.9% | ~0pp | Flat |
PG's +21.6% improvement rate (relative to its starting point) is the highest in the group. If this trajectory continues for another 8 quarters, PG would close the gap with KO.
The investment question becomes: Is a stable 34% ROIC (CL) more valuable than an improving 24% ROIC (PG)?
Product Link: View PG ROIC Trajectory | View CL ROIC Trajectory
The Hidden $12 Billion Problem at Coca-Cola
Coca-Cola's financials look stellar: 61.5% gross margin, 36.6% FCF margin, 28.2% ROIC. But standard metrics miss a material risk sitting in the footnotes:
From our analysis of KO's Q3 2025 10-Q filing:
"Significant tax litigation with potential liability of $6.0 billion (paid as deposit) and future exposure estimated at $12 billion."
"While management believes potential legal proceedings will not be material, the scale of the tax litigation remains a significant concern."
Source: MetricDuck Filing Intelligence extraction of KO 10-Q, filed October 23, 2025
What This Means
- KO has already paid $6 billion as a tax deposit
- Additional exposure estimated at $12 billion—roughly 5% of market cap
- This doesn't appear in ROIC calculations, EPS, or free cash flow
- It DOES appear in our hidden liabilities risk score: HIGH
Comparing Hidden Liability Profiles
| Company | Hidden Liab. Risk | Key Exposures |
|---|---|---|
| PG | Moderate | $124M uncertain tax positions; restructuring charges ongoing |
| KO | HIGH | $12B tax litigation; BodyArmor impairment ($760M); guarantees |
| CL | Moderate | Brazilian tax disputes; talcum powder litigation |
| PEP | Low | $1.9B Rockstar impairment (already recognized) |
PEP has the cleanest balance sheet—its major impairment (Rockstar brand) is already on the books, not hiding in contingent liabilities.
Investor Implication: KO's superior cash generation metrics may be offset by the tax liability risk. A $12B resolution would impact ~$0.50 per share or roughly 2 years of dividend payments.
Product Link: View KO Filing Intelligence | View PEP Filing Intelligence
Earnings Quality: Why CL's 8/10 Matters
Earnings quality measures how much reported earnings are backed by actual cash flow and sustainable operations (vs accounting choices and one-time items).
| Company | Earnings Quality | Why This Score |
|---|---|---|
| CL | 8/10 | Clean accounting, stable operations, minimal one-time items |
| PG | 7/10 | Good, but significant restructuring charges ongoing |
| PEP | 7/10 | Solid, but productivity charges and impairments |
| KO | 6/10 | Refranchising gains obscure underlying operations |
Why Coca-Cola Scores Lowest
From our analysis of KO's Q3 2025 10-Q filing:
"The company recognized substantial gains from divestitures and refranchising activities, which can obscure underlying operational performance and may not be sustainable."
"Significant impairment charge on BodyArmor trademark ($760 million) suggests initial valuation or future performance projections were overly optimistic."
Source: MetricDuck Filing Intelligence extraction of KO 10-Q
KO's operating income increased 59% YoY in Q3 2025. But this was "primarily driven by reduced one-time charges"—not operational improvement. Strip out the noise, and KO's unit case volume is flat to declining in key regions (North America, Latin America).
The earnings quality gap matters because: High ROIC + Low earnings quality = potential for mean reversion. CL's combination of highest ROIC AND highest earnings quality makes it the most defensible position.
The Volume Problem Nobody Wants to Discuss
All four companies face the same structural challenge: pricing is holding, but volume is not.
| Company | Volume Trend | Pricing Action | Net Result |
|---|---|---|---|
| PG | -1% overall | +1% pricing | Flat organic sales |
| CL | -1.5% | +2.3% pricing | +0.9% organic |
| KO | Mixed (NA flat, LatAm -3%) | Favorable initiatives | Growth via pricing |
| PEP | Declining key markets | Effective net pricing | Revenue maintained |
Why This Matters
"Worldwide Net sales were $5,131 in the third quarter of 2025, up 2.0% from the third quarter of 2024, due to net selling price increases of 2.3% and positive foreign exchange of 1.2%, partially offset by volume declines of 1.5%." — CL Q3 2025 10-Q
Volume declines indicate one or more of:
- Consumer trade-down to private labels (now 21% US market share)
- Price elasticity finally hitting—consumers buying less at higher prices
- Category maturity—no organic growth left to capture
The price-over-volume strategy works until it doesn't. Each company is betting that brand strength can sustain pricing power indefinitely. Private label's continued share gains suggest this bet is under pressure.
Sector Context: The January 2026 "Defensive Pivot"
Why are investors suddenly interested in consumer staples capital efficiency?
- Recession Probability: JPMorgan estimates 35% for 2026
- Bank Stocks: Down 8% YTD as of January 2026
- Consumer Staples: Hitting record highs as investors rotate
- XLP (Sector ETF): $12.7B AUM, 0.09% expense ratio, 2.5% yield
The "Great Defensive Pivot" is rotating capital from financials to consumer staples. But not all defensive stocks are equally defensive:
| Factor | Best Choice | Why |
|---|---|---|
| Capital Efficiency | CL | Highest ROIC at 34.4% |
| Improvement Trajectory | PG | +21.6% ROIC trend |
| Cash Generation | KO | 36.6% FCF margin |
| Balance Sheet Safety | PEP | Lowest hidden liabilities |
| Earnings Quality | CL | 8/10 score |
No single company wins on all factors. The "safest" defensive stock depends on what risk you're most trying to avoid.
How to Use This Data: Investment Framework
Framework 1: Quality Over Trajectory
Prefer CL if you believe:
- Stable, high ROIC is more valuable than improving ROIC
- Earnings quality matters for downside protection
- The company already operates at optimal efficiency
Framework 2: Trajectory Over Current Level
Prefer PG if you believe:
- ROIC improvement signals execution momentum
- New CEO (Shailesh Jejurikar, Jan 2026) can accelerate improvement
- Current ROIC gap represents opportunity, not permanent discount
Framework 3: Risk-Adjusted Returns
Avoid or underweight KO if you believe:
- $12B tax liability is material to thesis
- Refranchising gains mask underlying weakness
- LOW earnings quality (6/10) means ROIC may mean-revert
Framework 4: Balance Sheet Safety
Prefer PEP if you believe:
- Clean balance sheet matters most in recession
- Rockstar impairment is already priced in
- Flat trajectory acceptable for safety
P&G Q2 FY2026: What the Latest Earnings Reveal
P&G reported Q2 FY2026 on January 22, 2026. The results illustrate the segment divergence that explains its ROIC trajectory:
| Segment | Volume | Observation |
|---|---|---|
| Beauty | +3% | Only segment growing |
| Grooming | -2% | Gillette pressure continues |
| Health Care | -2% | Heightened competition |
| Fabric & Home Care | -2% | Rivals promoting aggressively |
| Baby/Feminine/Family | -5% | Steepest decline |
"We expect to incur approximately $1.5 to $2.0 billion in before-tax restructuring costs over a two-year period." — P&G Q2 FY2026 10-Q
"Gross margin decreased 90 basis points due to unfavorable product mix, investments, tariff costs, and foreign exchange, partially offset by productivity savings and higher pricing." — PG 10-Q
Key Takeaway: PG's ROIC improvement (+21.6% trajectory) is happening DESPITE segment headwinds. The restructuring program is driving efficiency gains that offset volume declines. This is operational execution, not top-line growth.
The question: Can execution gains continue if Beauty (the only growing segment) represents a shrinking share of mix?
Methodology and Data Sources
Metrics Calculation
| Metric | Formula | Note |
|---|---|---|
| ROIC (Asset-Based) | NOPAT / Average Invested Capital | Operating approach; excludes goodwill distortions |
| FCF Margin | Free Cash Flow / Revenue | TTM basis |
| Gross Margin | Gross Profit / Revenue | Point-in-time quarterly |
| Earnings Quality | Proprietary 5-pass AI analysis | Cash backing, one-time items, sustainability |
| Hidden Liabilities | Filing Intelligence extraction | Contingent liabilities, litigation, off-balance items |
Data Sources
| Category | Source |
|---|---|
| Financial metrics | BigQuery filing_metrics table (SEC XBRL extractions) |
| Filing intelligence | BigQuery filing_intelligence table (5-pass AI analysis) |
| Earnings insights | BigQuery earnings_insights table (8-K extraction) |
| SEC quotes | Direct extraction from 10-Q/10-K filings |
Important Caveats
-
ROIC methodology varies: Our asset-based ROIC differs from some data providers. FinanceCharts shows PG at 18.32% and CL at 28.57% using different capital definitions. Always verify methodology.
-
Fiscal year differences: PG (June FYE), KO/CL/PEP (December FYE) create temporal misalignment in quarterly comparisons.
-
CL ROIC methodology note: CL's roic_asset_based metric unavailable; using standard ROIC which may not be perfectly comparable.
Disclaimer
This analysis is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.
The hidden liabilities discussion regarding Coca-Cola's tax litigation reflects our interpretation of SEC filings. Actual outcomes may differ materially. Investment decisions should not rely solely on this analysis.
Explore More ROIC Analysis
This article is part of our comprehensive ROIC Analysis Hub, which covers sector benchmarks, peer comparisons, and capital efficiency screening frameworks.
Related consumer/defensive research:
- ROIC: The Complete Investor Guide — Sector benchmarks, formula, and screening framework
- Retail ROIC Rankings: Costco vs Walmart — Asset turnover analysis
- Dividend Screening Framework — FCF-backed dividend analysis
- Earnings Quality Analysis — Understanding cash backing
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SEC filing analysis and XBRL data extraction for fundamental investors