Coca-Cola in China

Citing Coca-Cola's "market dominance in carbonated soft drinks" in China, the nation's Ministry of Commerce recently rejected Coke's bid to acquire China Huiyuan Juice Group (CHJ), fearing that the acquisition would limit competition in China's juice market.

This may not be such bad news for Coca-Cola shareholders. China is already Coke's fastest-growing market, with quarterly unit volume up 29 percent year over year. And Coke's $2.4 billion bid was rather pricey, at 45 times CHJ's estimated profits for this year, when long-term growth expectations for CHJ are 30 percent.

Pundits have noted that Coke offered a 200 percent premium to CHJ's pre-bid market price, suggesting just how crazy a price Coke was willing to pay. Strong growth is available elsewhere. In Russia, for example, its biggest independent and publicly traded player, Wimm-Bill-Dann, was recently priced around 0.4 times sales, vs. the 6.5-times-sales price Coke was offering for CHJ.

Coca-Cola's desire to get an edge on PepsiCo in China, snagging 43 percent share of the juice market by buying CHJ, is understandable. But valuation matters. It always matters.

And that, Fools, is why Coke's "bad" news is actually good news for shareholders - and why investors were wrong to sell shares of the stock based on the news.