Don't Judge Coca-Cola on Technicals Alone - Check Its Fundamentals!

Coca-Cola logged a 0.2% change during today's morning session, and is now trading at a price of $56.85 per share.

Over the last year, Coca-Cola logged a -3.0% change, with its stock price reaching a high of $64.99 and a low of $51.55. Over the same period, the stock underperformed the S&P 500 index by -19.0%. As of April 2023, the company's 50-day average price was $56.52. The Coca-Cola Company, a beverage company, manufactures, markets, and sells various nonalcoholic beverages worldwide. Based in Atlanta, GA, the large-cap Consumer Staples company has 82,500 full time employees. Coca-Cola has offered a 3.2% dividend yield over the last 12 months.

The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:

2018 2019 2020 2021 2022 2023
Revenue (MM) $34,300 $37,266 $33,014 $38,655 $43,004 $44,140
Gross Margins 62% 61% 59% 60% 57% 59%
Operating Margins 27.0% 28.0% 30.0% 32.0% 27.0% 28.0%
Net Margins 19.0% 24.0% 24.0% 25.0% 22.0% 24.0%
Net Income (MM) $6,476 $8,985 $7,768 $9,804 $9,571 $10,512
Net Interest Expense (MM) $950 $946 $1,437 $2,000 $882 $1,248
Depreciation & Amort. (MM) $1,086 $1,365 $1,536 $1,452 $1,260 $1,181
Earnings Per Share $1.5 $2.07 $1.79 $2.25 $2.19 $2.42
Diluted Shares (MM) 4,299 4,314 4,323 4,340 4,350 4,326
Free Cash Flow (MM) $389 $8,417 $8,667 $11,258 $9,534 $9,489
Capital Expenditures (MM) $1,548 $2,054 $1,177 $1,367 $1,484 $1,612
Net Current Assets (MM) -$14,165 -$17,484 -$5,651 -$6,733 -$6,084 -$5,981
Long Term Debt (MM) $25,376 $27,516 $40,125 $38,116 $36,377 $35,626
Net Debt / EBITDA 4.36 3.92 4.18 3.44 3.45 3.19

Coca-Cola has growing revenues and a flat capital expenditure trend and wider gross margins than its peer group. Additionally, the company's financial statements display decent operating margins with a stable trend and positive EPS growth. However, the firm has a highly leveraged balance sheet. Finally, we note that Coca-Cola has irregular cash flows.

Coca-Cola's Valuation Is in Line With Its Sector Averages:

Coca-Cola has a trailing twelve month P/E ratio of 22.9, compared to an average of 24.36 for the Consumer Staples sector. Based on its EPS guidance of $2.62, the company has a forward P/E ratio of 21.6. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 8.3%. On this basis, the company's PEG ratio is 2.76, which suggests that it is overpriced. Furthermore, Coca-Cola is likely overvalued compared to the book value of its equity, since its P/B ratio of 9.34 is higher than the sector average of 4.29. The company's shares are currently trading 213.6% above their Graham number.

Coca-Cola Has an Average Rating of Buy:

The 21 analysts following Coca-Cola have set target prices ranging from $55.64 to $70.73 per share, for an average of $61.97 with a buy rating. As of April 2023, the company is trading -8.8% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Coca-Cola has a very low short interest because 0.6% of the company's shares are sold short. Institutions own 71.5% of the company's shares, and the insider ownership rate stands at 0.67%, suggesting a small amount of insider investors. The largest shareholder is Berkshire Hathaway, Inc, whose 9% stake in the company is worth $22,744,000,244.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.