KO

Coca-Cola Investors, You Need to Know This

We've been asking ourselves recently if the market has placed a fair valuation on Coca-Cola. Let's dive into some of the fundamental values of this large-cap Consumer Staples company to determine if there might be an opportunity here for value-minded investors.

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 23.6 and a P/B ratio of 9.56.

Coca-Cola's PEG ratio is 4.35, 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.

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 $45,030
Gross Margins 62% 61% 59% 60% 57% 59%
Operating Margins 27% 28% 30% 32% 27% 28%
Net Margins 19% 24% 24% 25% 22% 24%
Net Income (MM) $6,476 $8,985 $7,768 $9,804 $9,571 $10,773
Net Interest Expense (MM) $950 $946 $1,437 $2,000 $882 $1,418
Depreciation & Amort. (MM) $1,086 $1,365 $1,536 $1,452 $1,260 $1,164
Earnings Per Share $1.5 $2.07 $1.79 $2.25 $2.19 $2.48
Diluted Shares (MM) 4,299 4,314 4,323 4,340 4,350 4,319
Free Cash Flow (MM) $389 $8,417 $8,667 $11,258 $9,534 $10,170
Capital Expenditures (MM) $1,548 $2,054 $1,177 $1,367 $1,484 $1,709
Net Current Assets (MM) -$14,165 -$17,484 -$5,651 -$6,733 -$6,084 -$5,840
Long Term Debt (MM) $25,376 $27,516 $40,125 $38,116 $36,377 $34,176
Net Debt / EBITDA 4.36 3.92 4.18 3.44 3.45 3.14

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.

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.

IN FOCUS