Today we're going to take a closer look at large-cap Consumer Staples company Coca-Cola, whose shares are currently trading at $60.8. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Coca-Cola's Valuation Is in Line With Its Sector Averages:
The Coca-Cola Company, a beverage company, manufactures, markets, and sells various nonalcoholic beverages worldwide. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, Coca-Cola has a trailing 12 month P/E ratio of 26.8 and a P/B ratio of 10.11.
Coca-Cola's PEG ratio is 3.59, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Wider Gross Margins Than the Industry Average of 53.55%:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $37,266 | $33,014 | $38,655 | $43,004 |
| Gross Margins | 60.8% | 59.3% | 60.3% | 58.1% |
| Operating Margins | 27.1% | 27.2% | 26.7% | 25.4% |
| Net Margins | 23.94% | 23.47% | 25.28% | 22.19% |
| Net Income (MM) | $8,920 | $7,747 | $9,771 | $9,542 |
| Net Interest Expense (MM) | -$383 | -$1,067 | -$1,321 | -$433 |
| Depreciation & Amort. (MM) | -$1,365 | -$1,536 | -$1,452 | -$1,260 |
| Earnings Per Share | $2.07 | $1.79 | $2.25 | $2.27 |
| EPS Growth | n/a | -13.53% | 25.7% | 0.89% |
| Diluted Shares (MM) | 4,314 | 4,323 | 4,340 | 4,325 |
| Free Cash Flow (MM) | $8,417 | $8,667 | $11,258 | $9,534 |
| Capital Expenditures (MM) | -$2,054 | -$1,177 | -$1,367 | -$1,484 |
| Net Current Assets (MM) | -$44,872 | -$46,772 | -$46,949 | -$44,346 |
| Current Ratio | 0.76 | 1.32 | 1.13 | 1.15 |
| Long Term Debt (MM) | $27,516 | $40,125 | $38,116 | $36,377 |
| Net Debt / EBITDA | 2.91 | 2.92 | 2.18 | 2.22 |
Coca-Cola has strong margins with a stable trend, a steady stream of strong cash flows, and growing revenues and decreasing reinvestment in the business. The company also benefits from wider gross margins than its peer group, positive EPS growth, and healthy leverage. Furthermore, Coca-Cola has just enough current assets to cover current liabilities.
