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Coca-Cola

NYSE:KO
Snowflake Description

6 star dividend payer with moderate growth potential.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
KO
NYSE
$194B
Market Cap
Soft Drinks
Company description

The Coca-Cola Company, a beverage company, manufactures and distributes various nonalcoholic beverages worldwide. More info.


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3 Month History
KO
Industry
5yr Volatility vs Market

Value

 Is Coca-Cola undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Coca-Cola to its discounted cash flow value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Coca-Cola is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avacados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Coca-Cola's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Coca-Cola's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Good value based on earnings compared to the Food and Beverage industry average.
  • Overvalued based on earnings compared to the overall market.
Price based on expected Growth
Does Coca-Cola's expected growth come at a high price?
  • Poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Coca-Cola's assets?
  • Overvalued based on assets compared to the Food and Beverage industry average.
X
Value checks
We assess Coca-Cola's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
  2. Is the PE ratio less than the market average, and/ or less than the Food and Beverage industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Food and Beverage industry average (and greater than 0)? (1 check)
  5. Coca-Cola has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (21.31%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (Free cash flow to Equity)

The calculations below outline how an intrinsic value for Coca-Cola is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$31,512

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $9,578 × (1 + 2.3%) ÷ (8.47% – 2.3%)

Terminal value based on the Perpetuity Method where growth (g) = 2.3%:
$159,732

Present value of terminal value:
$106,396

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value

Value = Total value / Shares Outstanding ($137,908 / 4,273)

Value per share:
$32.28

Current discount (share price of $45.39): -41%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.47% = 2.33% + (0.8 * 7.67%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.465 = 0.397 (1 + (1- 30%) (24.52%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 2.33% is from the 10 year government bond rate in US.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Coca-Cola expected to perform in the next 1 to 3 years based on estimates from 17 analysts?

    The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

    Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
    3 year growth
    41%
    Expected earnings growth over 3 years.
    Future Earnings growth analysis
    Is Coca-Cola expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.

    Are Coca-Cola's annual earnings growth expected to exceed 3.4% over the next 3 years?

    • After 1 year
    • After 3 years
    1 & 3 year estimated growth in earnings
    Past and Future Earnings per Share
    The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
    Analysts growth expectations
    2 year growth check
    Super high growth metrics x1.5?

    Which of the these is expected to increase by over 50% in 2 year's time?

    • Revenue
    • Cash flow
    • Profit
    Performance in 3 years
    In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
    • Coca-Cola is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

    Improvement & Relative to industry
    • Expected to be above the Food and Beverage industry average.
    • An improvement in Coca-Cola's performance (ROE) is expected over the next 3 years.
    X
    Future performance checks
    We assess Coca-Cola's future performance by looking at:
    1. Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
    2. Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
    3. Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
    4. Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
    5. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
    Some of the above checks will fail if the company is expected to be loss making in the relevant year.
    Coca-Cola has a total score of 3/6, see the detailed checks below.

    Note: If no +3 year data is available, +2.5 year data may be used.

    Note 2: We use GAAP per Share in all our calculations.

    Full details on the Future part of the Simply Wall St company analysis model.

    Past Performance

     How has Coca-Cola performed over the past 5 years?

    The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
    Past earnings growth
    Below we compare Coca-Cola's growth in the last year to its industry (Food and Beverage).
    Past Earnings growth analysis
    We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
    • Coca-Cola's earnings growth has not matched the industry average in the past year.
    • Coca-Cola's 1 year earnings growth is negative.
    • Coca-Cola earnings have fallen over the past 5 years.
    Profit History
    Coca-Cola's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
    Performance last year
    We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
    • Strong return on shareholders funds (ROE) last year.
    • Coca-Cola performed worse than the Food and Beverage industry average based on return on assets (ROA) last year.
    • Performance based on revenue producing assets (ROCE) has been diminishing over 3 years.
    X
    Past performance checks
    We assess Coca-Cola's performance over the past 5 years by checking for:
    1. Has earnings per share (EPS) increased in past 5 years? (1 check)
    2. Has the EPS growth in the last year exceeded that of the Food and Beverage industry? (1 check)
    3. Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
    4. Is the Return on Equity (ROE) higher than 20%? (1 check)
    5. Is the Return on Assets (ROA) above industry average? (1 check)
    6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
    The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
    Coca-Cola has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations.

    Full details on the Past part of the Simply Wall St company analysis model.

    Health

     How is Coca-Cola's financial health and their level of debt?

    A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

    The boxes below represent the relative size of what makes up Coca-Cola's finances.

    The net worth of a company is the difference between its assets and liabilities.
    Net Worth
    • Coca-Cola is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
    • Coca-Cola's cash and other short term assets cover its long term commitments.
    Balance sheet
    This treemap shows a more detailed breakdown of Coca-Cola's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
    Assets
    Liabilities and shares
    The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
    • Low level of unsold assets
    • Total debt is not covered by total short term assets.
    Historical Debt
    Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

    The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

    If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
    • The level of debt (206%) compared to net worth is high (greater 40%).
    • The level of debt compared to net worth has increased over the past 5 years (94% vs 206% today).
    • Total debt is not well covered by annual operating cash flow (less than 20% of total debt).
    • Interest on debt is well covered by earnings (124.4x coverage).
    X
    Financial health checks
    We assess Coca-Cola's financial health by checking for:
    1. Are short term assets greater than short term liabilities? (1 check)
    2. Are short term assets greater than long term liabilities? (1 check)
    3. Has the debt to equity ratio increased in the past 5 years? (1 check)
    4. Is the debt to equity ratio over 40%? (1 check)
    5. Is the debt covered by short term assets? (1 check)
    6. Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
    7. Coca-Cola has a total score of 3/6, see the detailed checks below.


    Full details on the Health part of the Simply Wall St company analysis model.

    Dividends

     What is Coca-Cola's current dividend yield, its reliability and sustainability?

    Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
    Annual Dividend Income
    Dividend payments
    3.34%
    Current annual income from Coca-Cola dividends. Estimated to be 3.53% next year.
    If you bought $2,000 of Coca-Cola shares you are expected to receive $67 in your first year as a dividend.
    Dividend Amount
    Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
    • Paying above low risk savings rate. (2.25%)
    • Paying above the markets top dividend payers. (3.18%)
    Upcoming dividend payment

    Purchase Coca-Cola on or before the 'Buy Limit' to receive their next dividend payment.

    Dividends are usually paid every 3 or 6 months, you can time your share purchase to take advantage of upcoming dividend payments.
    Dividend payment calendar
    Historical dividend yield
    It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

    We also check to see if the dividend has increased in the past 10 years.
    • Dividends per share have been stable in the past 10 years.
    • Dividends per share have increased over the past 10 years.
    Current Payout to shareholders
    What portion of Coca-Cola's earnings are paid to the shareholders as a dividend.
    • Dividends paid are covered by net profit (1.4x coverage).
    Future Payout to shareholders
    • Dividends after 3 years are expected to be covered by net profit (1.3x coverage).
    X
    Income/ dividend checks
    We assess Coca-Cola's dividend by checking for:
    1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
    2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
    3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
    4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
    5. How sustainable is the dividend, can Coca-Cola afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
    6. Coca-Cola has a total score of 6/6, see the detailed checks below.


    Full details on the Dividends part of the Simply Wall St company analysis model.

    Management

     What is the CEO of Coca-Cola's salary, the management and board of directors tenure and is there insider trading?

    Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
    CEO
    James Quincey, image provided by Google.
    James Quincey
    COMPENSATION$8,703,710
    AGE52
    CEO Bio

    Mr. James Robert B. Quincey has been Chief Executive Officer of The Coca-Cola Company since May 1, 2017. Mr. Quincey has been the President and served as its Chief Operating Officer of The Coca-Cola Company since August 13, 2015 until May 1, 2017. Mr. Quincey served as the Chief Operating Officer of The Coca-Cola Company since August 13, 2015 until May 1, 2017. Mr. Quincey served as the President of Europe Group at The Coca-Cola Company and Coca Cola International Corp. from January 1, 2013 to August 2015. He served as the President of the Northwest Europe and Nordics Business Unit at The Coca-Cola Company since January 1, 2013. He served as the President of Northwest Europe & Nordics Business Unit at The Coca-Cola Company until January 1, 2013. He served as the President of Mexico Division of Coca-Cola Co since December 2005 until 2008 and also served as its President of South Latin Division since December 2003. Mr. Quincey joined Coca-Cola Company in Atlanta in 1996 as Director of Learning Strategy of the Latin America Group until he moved to Mexico as deputy to the Division President in April 1999. He served as a Region Manager of Argentina & Uruguay since 2000 and then also served as a General Manager of the South Cone region (Argentina, Chile, Uruguay & Paraguay) since January 2003. Prior to joining Coca-Cola Company, he served for The Kalchas Group, as a Partner in strategy consulting. He has been a Director of The Coca-Cola Company since April 26, 2017. He served as a Director of Embotelladora Andina S.A., since April 2006. Mr. Quincey holds a Bachelor's degree in Electronic Engineering from the University of Liverpool and is an Electronic Engineer.

    CEO Compensation
    • CEO's compensation has been consistent with company performance over the past year.
    • CEO's compensation appears reasonable.
    Management Team Tenure

    Average tenure of the Coca-Cola management team:

    Management tenure
    3.3 years
    • The tenure for the Coca-Cola management team is about average.
    Management Team

    James Quincey

    TITLE
    Chief Executive Officer
    COMPENSATION
    $8,703,710
    AGE
    52

    Kathy Waller

    TITLE
    Chief Financial Officer
    COMPENSATION
    $7,019,422
    AGE
    59

    Irial Finan

    TITLE
    Executive Vice President and President of Bottling Investments Group
    COMPENSATION
    $6,779,286
    AGE
    60

    Ed Hays

    TITLE
    Chief Technical Officer and Senior Vice President
    AGE
    58

    Barry Simpson

    TITLE
    Chief Information Officer and Senior Vice President
    AGE
    57

    Tim Leveridge

    TITLE
    Vice President and Investor Relations Officer
    AGE
    47
    Board of Directors Tenure

    Average tenure of the Coca-Cola board of directors:

    Board tenure
    13 years
    • The average tenure for the Coca-Cola board of directors is over 10 years, this suggests they are a seasoned and experienced board.
    Board of Directors

    Muhtar Kent

    TITLE
    Chairman of the Board
    COMPENSATION
    $17,551,944
    AGE
    64

    James Quincey

    TITLE
    Chief Executive Officer
    COMPENSATION
    $8,703,710
    AGE
    52

    Steve Chan

    TITLE
    Chairman of Coca-Cola China Limited
    AGE
    60

    Zahi Khouri

    TITLE
    Chairman of Palestinian National Beverage Company and CEO of Palestinian National Beverage Company

    John Brock

    TITLE
    Chairman of Coca-Cola Enterprises Inc and Chief Executive Officer of Coca-Cola Enterprises Inc
    AGE
    68

    Ron Allen

    TITLE
    Independent Director
    COMPENSATION
    $259,198
    AGE
    75
    Recent Insider Trading
    Who owns this company?
    X
    Management checks
    We assess Coca-Cola's management by checking for:
    1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
    2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
    3. Is the average tenure of the management team less than 2 years? (1 check)
    4. Is the average tenure of the board of directors team less than 3 years? (1 check)
    5. Coca-Cola has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.


    Note: We use the top 6 management executives and board members in our calculations.

    Note 2: Insider trading include any internal stakeholders and these transactions.

    Full details on the Management part of the Simply Wall St company analysis model.

    Company News

    Company Info

    Description

    The Coca-Cola Company, a beverage company, manufactures and distributes various nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters. The company’s still beverages comprise nonalcoholic beverages without carbonation, including noncarbonated waters, flavored and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees, and sports drinks. It also provides flavoring ingredients, sweeteners, beverage ingredients, and fountain syrups, as well as powders for purified water products. The Coca-Cola Company sells its products primarily under the Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero, Fanta, Sprite, Minute Maid, Georgia, Powerade, Del Valle, Schweppes, Aquarius, Minute Maid Pulpy, Dasani, Simply, Glacéau Vitaminwater, Gold Peak, FUZE TEA, Glacéau Smartwater, Ice Dew, I LOHAS, and Ayataka brand names. The company offers its beverage products through a network of company-owned or controlled bottling and distribution operators, as well as through independent bottling partners, distributors, wholesalers, and retailers. The Coca-Cola Company was founded in 1886 and is headquartered in Atlanta, Georgia.

    Details
    Name:The Coca-Cola Company
    Ticker:KO
    Exchange:NYSE
    Founded:1886
    Market Cap:$193,931 million
    Website:http://www.coca-colacompany.com
    Listings
    Map

    One Coca-Cola Plaza, Atlanta, 30313, United States

    Number of employees
    Street

    Current staff
    Staff numbers
    100,300
    Coca-Cola employees.
    Industry
    Industry:Soft Drinks
    Sector:Food, Beverage and Tobacco