The main aim of this report is to identify and analyze two major companies in the soft drinks industry and make a recommendation on which of them can be considered for investment purposes. The use of various stock valuation models will be applied to quantitatively analyze the financial stability of these companies and their common stock markets performance. All information about the companies is sourced from Edgar and other sites that provide financial information. Ruback (1995) notes that “Coca-Cola and Pepsi have been rivals in the soft drink market for over a century and both companies enjoy a high degree of brand recognition globally whereby Coca-Cola is the largest manufacturer and distributor of non-alcoholic beverage concentrates and syrups in the world.” It also has other small businesses under it like; bottling and canning operations. Anuar (2007) observed that “The company(coca Cola) is a multi-international and all its products are grouped into eight businesses to include: Africa, Eurasia, European Union, Latin America, North America, Pacific, Bottling Investments, and the Corporate.” The products are marketed and sold in more than 100 nations globally and consist of: Coca-Cola, Crush, Sprite, Fanta, Dasani water Fruitopia, Minute Maid juices. Aswath, (2007) notes that “Pepsi is a leading global snack and beverage company; it manufactures, markets, and sells a variety of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods. The company operates in 200 countries outside the U.S. and Canada and gets revenues from four of its major businesses.” Pepsi has also largely benefited from its merges with Frito-Lay and Quaker Oats, by acquiring its businesses ,the company revenues have shot upwards a factor that has also led to its stocks gaining value and hence investors can be recommended to invest in Pepsi. “Coca-Cola’s stock was trading at an average valuation of $45.00 dollars per share in 2003, almost getting to $50.00 dollar, a very high value where it went ahead and shot further to $59.33 in the year 2008. But this can be considered as a drop compared to the $100.00 dollar price range in the 1990’s.” (Copeland & Koller, 2000). This drop was caused by the change in consumer preference for carbonated drinks and flavored water. Hence this factor should be a key element for investors intending to invest in the company as it as not shown a significant change to healthier drinks like its counterpart has done. Pepsi Company has taken a keen strategy on being diverse with their products and has seriously considered the issue of consumer health in production of their products and this has made them be ahead of Coca-Cola in the market for the first time in history (Rosenbaum, 2009). Pepsi has changed its way of production by reducing production of sugary, fizzy soft drinks and snacks and now only a fifth of Pepsi’s sales now are from these products. The group’s sales growth was twice that of Coca-Cola in 2004, its shares have hit high records this year and have been trading consistently above its rival. Valuation is a process involving use of several procedures to estimate the economic value of a certain interest in a business. Our major interest in this report is the common stock markets of these two companies but also the company as a whole will be considered. Stock valuation methods are method