Since 1988, Coca-Cola (KO) stock has been a good enough investment for Warren Buffett … but that doesn’t mean that you should just dive in without doing your homework.

Shares have languished, having generated a return of barely 5% over the past year, about half that of rival PepsiCo (PEP).

Meanwhile, Goldman Sachs has a $41 price target — 3% lower than current prices — on KO stock based on the firm’s 2015 earnings estimates. And even the Oracle of Omaha has voiced some concerns about a sub-optimal use of Coca-Cola’s balance sheet of late — although he maintains his 9% stake in the company

On the flip side, Coca-Cola does have a few key catalysts that suggest potential upside ahead.

So, should you buy KO stock? Let’s take a look at whether the pros outweigh the cons:

KO Stock Pros

KO Is Growing: This fact might seem counterintuitive given that the U.S. carbonated soft-drink market is highly saturated, and given Coca-Cola’s gargantuan $180 billion market cap and $46.8 billion in 2013 net operating revenue. Still, KO stock apparently still has a sizable growth opportunity in emerging markets such as China.

After a recent visit with Coca-Cola officials in China, Goldman Sachs developed a more sanguine outlook Coca-Cola in that country. Indeed, KO is adapting to local consumption patterns there, resulting in a more centralized approach as opposed  to a broad-brush canvassing of its diverse product portfolio. In a recent report, Goldman analysts said:

“We walk away from the meeting encouraged by more segmented and targeted approach that KO is taking in China, which we believe could lead to better execution and more profitable growth.”

Goldman went on to say that it is seeing “firming growth” in the country amid an improved organizational structure and the more segmented approach, evidenced by a 12% volume increase in China in the first quarter.

Innovation: Coca-Cola continues to innovate, often ahead of its peers. Most recently, Coca-Cola took a 10% stake in Keurig Green Mountain (GMCR), which it then upped to 16%, in anticipation of the Keurig Cold machine, which is set to make its debut later this year. The risk isn’t huge given Coca-Cola’s war chest of roughly $20 billion in cash and short-term investments. Meanwhile, the opportunity is great — the market share opportunity for at-home beverages is on the rise, with domestic retail sales of these machines increasing 30% in 2013.

Shareholder Value: Coca-Cola generated $10.5 billion in cash flow in 2013 — a 1% decline vs. 2012 levels amid several seemingly short-term items. However, over the past five decades or so, Coca-Cola has regularly increased its dividend, most recently lifting its quarterly payout on KO stock by 9% to 30.5 cents per share. Coca-Cola also is focused on share repurchases, buying back $4.8 billion worth of shares last year.

KO Stock Cons

Shareholder Value: Yes, it’s a con, too. Despite its generous nearly 3% dividend yield, KO could be shortchanging investors. I’m referring to the company’s lucrative compensation plan, of which Buffett reportedly characterized as “excessive” and for which he declined to vote on during Coca-Cola’s most recent annual shareholder meeting. The compensation plan is tied to new stock awards being issued to employees, which dilutes existing shareholders’ holdings. According to Bloomberg, the latest equity awards would include nearly $30 billion in stock awards to KO execs on top of an existing equity plan. The company claimed that it remains flexible about the plan.

Competition: Another characteristic that works in favor of KO also serves as a con. Although Coca-Cola is a proven leader in innovation, it faces some stiff competition from the most unlikely of players. In addition to the obvious competition stemming from the likes of Israeli company SodaStream (SODA) — whose sales incidentally have been declining — and in addition to the threat of PepsiCo and Dr Pepper Snapple (DPS) becoming more aggressive in this space, coffee icon Starbucks (SBUX) has decided to pursue this path.

Starbucks’ Fizzio in recent days has been made available in thousands of U.S. Starbucks locations, giving consumers yet another option to enjoy a cold, carbonated soft-drink beverage. This in addition to PepsiCo’s new Spire fountain machine, which offers consumers 1,000 unique carbonated beverage combinations to go head-to-head with KO’s Freestyle soda fountain.

Declining Volumes: Soda sales have been on the decline, not only for KO but for the entire carbonated soft-drink industry. Consumer trends have shifted to healthier lifestyles and away from sugar-laden beverages and the artificial sweeteners found in diet sodas, evidenced by the 1% first-quarter decline in KO’s global sparkling-drink volume. That’s the first decline of its kind in about a decade-and-a-half, The Wall Street Journal noted.

Verdict

This year has shaped up to be one of transition for Coca-Cola, as it reworks its strategy in emerging markets like China and attempts to gain a foothold in the at-home carbonated beverage market. Wells Fargo Securities analyst Bonnie Herzog is cited in Beverage Daily as saying that next year will be “a critical tipping point” for soda companies.

Indeed, there are sure to be some winners and some losers. But when it comes to KO, its obstacles do not seem insurmountable.

So, should you buy KO stock? Yes — despite the headwinds, some of which are external and others of which seem to be internal, the pros seem to outweigh the cons.

As of this writing, Gerelyn Terzo did not hold a position in any of the aforementioned securities.