At US$577, Is Coca-Cola Consolidated, Inc. (NASDAQ:COKE) Worth Looking At Closely?

By
Simply Wall St
Published
February 16, 2022
NasdaqGS:COKE
Source: Shutterstock

Coca-Cola Consolidated, Inc. (NASDAQ:COKE), might not be a large cap stock, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a US$5.4b market-cap stock, it seems odd Coca-Cola Consolidated is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s examine Coca-Cola Consolidated’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Coca-Cola Consolidated

What's the opportunity in Coca-Cola Consolidated?

Great news for investors – Coca-Cola Consolidated is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 22.84x is currently well-below the industry average of 32.69x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Coca-Cola Consolidated’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Coca-Cola Consolidated generate?

earnings-and-revenue-growth
NasdaqGS:COKE Earnings and Revenue Growth February 15th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Coca-Cola Consolidated, it is expected to deliver a relatively unexciting top-line growth of 5.2% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since COKE is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on COKE for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy COKE. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 3 warning signs with Coca-Cola Consolidated, and understanding these should be part of your investment process.

If you are no longer interested in Coca-Cola Consolidated, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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