Everyone loves a bargain, especially on Wall Street. But just because a company's stock is cheap doesn't mean it is worth owning.

This is what you need to keep in the back of your mind as you compare Kraft Heinz (KHC -0.03%) to Coca-Cola (KO 0.47%). Both companies have seen stock declines over the past year, but one is facing much larger problems than the other. Here's the stock you should probably pick out of this pair, and it isn't the one with the biggest price decline.

The backdrop Kraft Heinz and Coca-Cola face today

Consumer staples companies that make food products, which is basically what both Kraft Heinz and Coca-Cola offer, are dealing with a shifting landscape. This is a material issue among investors, who seem to fear that the future will be more bleak than the past.

Image source: Getty Images.

One of the biggest issues is a new class of weight loss drug that has proven to be very effective. In fact, the drugs started out as diabetes drugs, but the weight loss benefit was so impressive that they are now offered for just weight loss. The interesting thing is that the drugs appear to change a person's eating habits, including both reducing appetite and altering the foods a patient wants to eat (usually shifting their tastes in a healthier direction). Some view them as weight loss miracle drugs. Wall Street has decided that the future for packaged food companies may not be as positive as it was in years past, due to this.

Social and political shifts are adding to that uncertainty. There appears to be a heightened focus on health, with a particular suspicion aimed at packaged food makers. After years of making high-density, high-calorie foods that drive people to, perhaps, eat more than they should, companies like Kraft Foods and Coca-Cola, among many others, appear to be drawing criticism. Simply put, packaged food makers are viewed as a major part of the obesity and health problems facing the world today.

These are some of the big reasons why Coca-Cola's stock has fallen around 13% from its 52-week high. Kraft Heinz is off by nearly 25%. However, the stock declines have pushed the dividend yields of these two companies into attractive territories. Dividend King Coca-Cola's yield is roughly 3% while Kraft Heinz's dividend yield is 5.3%. The average consumer staples stock is currently yielding roughly about 2.8%.

KHC data by YCharts.

There's an opportunity here, but tread carefully

Miracle weight loss drugs have a habit of not being miracles for long. History suggests there's a good chance that this new class of drugs won't change the world as is now expected. Food companies aren't going to sit around and do nothing in the face of shifts in consumer buying habits, anyway. So both Coca-Cola and Kraft Heinz will change as needed to keep their businesses going. But there's a big difference between these two companies.

Coca-Cola's business model has worked well for decades (as highlighted by the over 60 years' worth of annual dividend increases with which it has rewarded investors). Nothing material has changed on that front. The beverage giant remains a company with the size, distribution network, and financial strength to retain its industry-leading position via internal changes and through acquisitions that expand its reach.

That said, the company's yield is attractive, though only about middle-of-the-road historically speaking, and its price-to-sales and price-to-earnings ratios hint at a stock that's reasonably priced, if not a little cheap. Investors who buy Coca-Cola today, despite the fear around the stock, are getting a fair to slightly cheap price for a very well-run company.

That same assessment can't be made of food maker Kraft Heinz. The yield is higher than that of Coca-Cola, and most traditional valuation metrics hint that Kraft Heinz is trading cheaply, but the company isn't executing well. In fact, the company is trying to reposition itself after the merger of Kraft and Heinz failed to play out as expected. The merger's original goal was to cut costs, but that isn't really a long-term plan. After a management shakeup, the food maker is now looking to focus on its most important brands while shifting resources away from less important brands.

Kraft Heinz will probably eventually work through this directional change. But it isn't going particularly smoothly right now, which has investors downbeat on the stock. Given that the brands Kraft Heinz is "focused" on saw a 4.5% decline in organic sales in the third quarter of 2024, the negative mood seems reasonable.

Executing on the new business approach seems like it could be a multi-year affair. Aggressive investors who don't mind turnaround stories might find Kraft Heinz of interest, but most will probably be better off waiting for more signs of progress on that turnaround before stepping aboard.

A fair price for a great company

The match-up here is really a cheap price for a company struggling to find a workable business model, versus a fair price for a historically well-run company with a strong business model. Given that both have above-industry-average yields, it seems like a more prudent plan to err on the side of caution. That means Coca-Cola will win out over Kraft Heinz for most investors.