Evaluating Coca-Cola (KO) Valuation: Is the Classic Stock Priced for Predictability or Future Growth?

Coca-Cola (KO) shares have edged slightly higher over the past month, gaining 7%, as investors weigh the company’s steady performance. Market watchers are keeping an eye on recent revenue and net income growth, which suggest underlying momentum.

See our latest analysis for Coca-Cola.

Zooming out, Coca-Cola’s share price has shown impressive resilience, climbing 17.85% year-to-date and contributing to a compelling five-year total shareholder return of 56.21%. With momentum strengthening and the latest share price at $72.88, investors are seeing signs of renewed optimism in the stock.

If steady growth and renewed momentum are on your mind, now is a great moment to broaden your search and discover fast growing stocks with high insider ownership

But with earnings growth on one hand and multiple price targets indicating upside, the big question is whether Coca-Cola shares remain undervalued or if Wall Street has already priced in all of the company’s future gains.

Most Popular Narrative: 8% Overvalued

With Coca-Cola shares closing at $72.88, the leading narrative from AllTrades pegs fair value at $67.50, flagging the stock as just a touch expensive. The calculation relies on a lower discount rate in light of recent central bank moves, with implications for how investors may view the company’s long-term cash flows and predictable earnings power.

This demonstrates how even a small change in discount rates can add measurable value to Coca-Cola’s predictable cash flows. 3-Year Outlook (2028)
• Business: KO remains firmly entrenched in its core beverage moat, with growth in premium categories such as Zero Sugar, energy drinks, and functional waters.
• Financials: Revenue growth of approximately 4 to 5 percent CAGR, operating margins of 28 to 30 percent, and free cash flow of around $15 to $17 billion annually.
• Valuation: Price-to-earnings ratio of about 22 to 24, enterprise value to EBITDA of about 18 to 19. Investors still pay a premium for yield and predictability.

Read the complete narrative.

Curious which future financial targets drive this slightly higher price? AllTrades’ narrative reveals a detailed outlook for top-line growth and profit margins that underpin the valuation math. Is Coca-Cola counting on sustained cash flows or a bold move into new beverage categories to justify its premium? Read on to uncover the financial assumptions behind this close valuation call.

Result: Fair Value of $67.50 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, potential regulation on sugar or changing consumer tastes could quickly challenge Coca-Cola's premium pricing and predictable cash flow story.

Find out about the key risks to this Coca-Cola narrative.

Another Perspective: Our DCF Model Raises an Eyebrow

While the AllTrades narrative sees Coca-Cola as just a bit overpriced, our SWS DCF model paints a different picture. It values KO at $89.90 per share, which is almost 19% above the latest market price. That is a strong margin of safety and suggests upside others might be missing. Which narrative signals the real opportunity for investors?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Coca-Cola for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 923 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Coca-Cola Narrative

If you want to dig deeper or think another story deserves the spotlight, you can build your own narrative from scratch in just minutes. Do it your way

A great starting point for your Coca-Cola research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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