Intrinsic value of Coca-Cola - KO

Previous Close

$45.67

  Intrinsic Value

$16.80

stock screener

  Rating & Target

str. sell

-63%

  Value-price divergence*

-29%

Previous close

$45.67

 
Intrinsic value

$16.80

 
Up/down potential

-63%

 
Rating

str. sell

 
Value-price divergence*

-29%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of KO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 197.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -5.49
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  41,863
  42,700
  43,682
  44,805
  46,065
  47,462
  48,994
  50,663
  52,469
  54,415
  56,503
  58,737
  61,121
  63,659
  66,357
  69,219
  72,253
  75,464
  78,859
  82,447
  86,236
  90,233
  94,448
  98,892
  103,573
  108,504
  113,696
  119,160
  124,910
  130,959
  137,322
Variable operating expenses, $m
 
  34,267
  35,031
  35,904
  36,884
  37,970
  39,161
  40,459
  41,863
  43,376
  45,000
  45,675
  47,528
  49,502
  51,600
  53,826
  56,184
  58,681
  61,322
  64,112
  67,058
  70,166
  73,444
  76,899
  80,540
  84,374
  88,411
  92,660
  97,131
  101,835
  106,783
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  33,237
  34,267
  35,031
  35,904
  36,884
  37,970
  39,161
  40,459
  41,863
  43,376
  45,000
  45,675
  47,528
  49,502
  51,600
  53,826
  56,184
  58,681
  61,322
  64,112
  67,058
  70,166
  73,444
  76,899
  80,540
  84,374
  88,411
  92,660
  97,131
  101,835
  106,783
Operating income, $m
  8,626
  8,433
  8,652
  8,901
  9,182
  9,492
  9,833
  10,204
  10,606
  11,038
  11,503
  13,063
  13,593
  14,157
  14,757
  15,394
  16,068
  16,782
  17,538
  18,335
  19,178
  20,067
  21,004
  21,992
  23,034
  24,130
  25,285
  26,500
  27,779
  29,124
  30,539
EBITDA, $m
  10,413
  10,733
  10,979
  11,262
  11,578
  11,929
  12,315
  12,734
  13,188
  13,677
  14,202
  14,764
  15,363
  16,001
  16,679
  17,398
  18,161
  18,968
  19,821
  20,723
  21,675
  22,680
  23,739
  24,856
  26,033
  27,272
  28,577
  29,951
  31,396
  32,916
  34,516
Interest expense (income), $m
  663
  1,193
  1,231
  1,274
  1,323
  1,379
  1,440
  1,508
  1,581
  1,661
  1,746
  1,838
  1,936
  2,041
  2,153
  2,271
  2,397
  2,531
  2,672
  2,821
  2,979
  3,146
  3,322
  3,507
  3,703
  3,908
  4,125
  4,354
  4,594
  4,847
  5,113
Earnings before tax, $m
  8,136
  7,241
  7,421
  7,627
  7,858
  8,113
  8,393
  8,696
  9,025
  9,378
  9,757
  11,225
  11,657
  12,116
  12,604
  13,122
  13,671
  14,252
  14,866
  15,514
  16,199
  16,921
  17,683
  18,485
  19,331
  20,222
  21,159
  22,146
  23,185
  24,277
  25,426
Tax expense, $m
  1,586
  1,955
  2,004
  2,059
  2,122
  2,191
  2,266
  2,348
  2,437
  2,532
  2,634
  3,031
  3,147
  3,271
  3,403
  3,543
  3,691
  3,848
  4,014
  4,189
  4,374
  4,569
  4,774
  4,991
  5,219
  5,460
  5,713
  5,979
  6,260
  6,555
  6,865
Net income, $m
  6,527
  5,286
  5,417
  5,568
  5,736
  5,923
  6,127
  6,348
  6,588
  6,846
  7,122
  8,194
  8,509
  8,845
  9,201
  9,579
  9,980
  10,404
  10,852
  11,325
  11,825
  12,352
  12,908
  13,494
  14,112
  14,762
  15,446
  16,167
  16,925
  17,722
  18,561

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  22,516
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  87,270
  77,216
  78,992
  81,022
  83,301
  85,826
  88,597
  91,615
  94,881
  98,399
  102,176
  106,216
  110,527
  115,116
  119,994
  125,171
  130,656
  136,462
  142,603
  149,091
  155,941
  163,170
  170,792
  178,827
  187,293
  196,210
  205,598
  215,479
  225,877
  236,816
  248,323
Adjusted assets (=assets-cash), $m
  64,754
  77,216
  78,992
  81,022
  83,301
  85,826
  88,597
  91,615
  94,881
  98,399
  102,176
  106,216
  110,527
  115,116
  119,994
  125,171
  130,656
  136,462
  142,603
  149,091
  155,941
  163,170
  170,792
  178,827
  187,293
  196,210
  205,598
  215,479
  225,877
  236,816
  248,323
Revenue / Adjusted assets
  0.646
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
Average production assets, $m
  23,274
  23,741
  24,287
  24,912
  25,612
  26,389
  27,241
  28,169
  29,173
  30,255
  31,416
  32,658
  33,983
  35,395
  36,894
  38,486
  40,173
  41,958
  43,846
  45,841
  47,947
  50,169
  52,513
  54,984
  57,587
  60,328
  63,215
  66,253
  69,450
  72,813
  76,351
Working capital, $m
  7,478
  1,025
  1,048
  1,075
  1,106
  1,139
  1,176
  1,216
  1,259
  1,306
  1,356
  1,410
  1,467
  1,528
  1,593
  1,661
  1,734
  1,811
  1,893
  1,979
  2,070
  2,166
  2,267
  2,373
  2,486
  2,604
  2,729
  2,860
  2,998
  3,143
  3,296
Total debt, $m
  45,709
  35,166
  36,400
  37,811
  39,395
  41,150
  43,076
  45,173
  47,443
  49,889
  52,513
  55,321
  58,317
  61,507
  64,897
  68,495
  72,307
  76,342
  80,610
  85,119
  89,880
  94,904
  100,202
  105,786
  111,670
  117,867
  124,391
  131,259
  138,486
  146,088
  154,085
Total liabilities, $m
  64,208
  53,665
  54,899
  56,310
  57,894
  59,649
  61,575
  63,672
  65,942
  68,388
  71,012
  73,820
  76,816
  80,006
  83,396
  86,994
  90,806
  94,841
  99,109
  103,618
  108,379
  113,403
  118,701
  124,285
  130,169
  136,366
  142,890
  149,758
  156,985
  164,587
  172,584
Total equity, $m
  23,062
  23,551
  24,092
  24,712
  25,407
  26,177
  27,022
  27,942
  28,939
  30,012
  31,164
  32,396
  33,711
  35,111
  36,598
  38,177
  39,850
  41,621
  43,494
  45,473
  47,562
  49,767
  52,092
  54,542
  57,124
  59,844
  62,707
  65,721
  68,893
  72,229
  75,738
Total liabilities and equity, $m
  87,270
  77,216
  78,991
  81,022
  83,301
  85,826
  88,597
  91,614
  94,881
  98,400
  102,176
  106,216
  110,527
  115,117
  119,994
  125,171
  130,656
  136,462
  142,603
  149,091
  155,941
  163,170
  170,793
  178,827
  187,293
  196,210
  205,597
  215,479
  225,878
  236,816
  248,322
Debt-to-equity ratio
  1.982
  1.490
  1.510
  1.530
  1.550
  1.570
  1.590
  1.620
  1.640
  1.660
  1.690
  1.710
  1.730
  1.750
  1.770
  1.790
  1.810
  1.830
  1.850
  1.870
  1.890
  1.910
  1.920
  1.940
  1.950
  1.970
  1.980
  2.000
  2.010
  2.020
  2.030
Adjusted equity ratio
  0.201
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,527
  5,286
  5,417
  5,568
  5,736
  5,923
  6,127
  6,348
  6,588
  6,846
  7,122
  8,194
  8,509
  8,845
  9,201
  9,579
  9,980
  10,404
  10,852
  11,325
  11,825
  12,352
  12,908
  13,494
  14,112
  14,762
  15,446
  16,167
  16,925
  17,722
  18,561
Depreciation, amort., depletion, $m
  1,787
  2,299
  2,328
  2,360
  2,397
  2,437
  2,482
  2,530
  2,582
  2,639
  2,699
  1,701
  1,770
  1,843
  1,922
  2,004
  2,092
  2,185
  2,284
  2,388
  2,497
  2,613
  2,735
  2,864
  2,999
  3,142
  3,292
  3,451
  3,617
  3,792
  3,977
Funds from operations, $m
  8,575
  7,585
  7,745
  7,928
  8,133
  8,360
  8,608
  8,878
  9,170
  9,485
  9,822
  9,895
  10,279
  10,688
  11,123
  11,584
  12,072
  12,589
  13,135
  13,713
  14,322
  14,965
  15,643
  16,358
  17,111
  17,904
  18,739
  19,617
  20,542
  21,515
  22,538
Change in working capital, $m
  -221
  20
  24
  27
  30
  34
  37
  40
  43
  47
  50
  54
  57
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  107
  112
  118
  125
  131
  138
  145
  153
Cash from operations, $m
  8,796
  7,565
  7,721
  7,901
  8,103
  8,327
  8,572
  8,838
  9,127
  9,438
  9,771
  9,841
  10,222
  10,627
  11,058
  11,515
  11,999
  12,512
  13,054
  13,627
  14,231
  14,869
  15,542
  16,251
  16,999
  17,786
  18,614
  19,486
  20,404
  21,369
  22,385
Maintenance CAPEX, $m
  0
  -1,212
  -1,237
  -1,265
  -1,297
  -1,334
  -1,374
  -1,419
  -1,467
  -1,519
  -1,576
  -1,636
  -1,701
  -1,770
  -1,843
  -1,922
  -2,004
  -2,092
  -2,185
  -2,284
  -2,388
  -2,497
  -2,613
  -2,735
  -2,864
  -2,999
  -3,142
  -3,292
  -3,451
  -3,617
  -3,792
New CAPEX, $m
  -2,262
  -467
  -546
  -624
  -701
  -776
  -852
  -928
  -1,004
  -1,082
  -1,161
  -1,242
  -1,325
  -1,411
  -1,500
  -1,592
  -1,687
  -1,785
  -1,888
  -1,995
  -2,106
  -2,222
  -2,344
  -2,471
  -2,603
  -2,742
  -2,886
  -3,038
  -3,197
  -3,363
  -3,538
Cash from investing activities, $m
  -999
  -1,679
  -1,783
  -1,889
  -1,998
  -2,110
  -2,226
  -2,347
  -2,471
  -2,601
  -2,737
  -2,878
  -3,026
  -3,181
  -3,343
  -3,514
  -3,691
  -3,877
  -4,073
  -4,279
  -4,494
  -4,719
  -4,957
  -5,206
  -5,467
  -5,741
  -6,028
  -6,330
  -6,648
  -6,980
  -7,330
Free cash flow, $m
  7,797
  5,885
  5,939
  6,012
  6,105
  6,216
  6,345
  6,492
  6,656
  6,837
  7,035
  6,963
  7,196
  7,446
  7,715
  8,002
  8,308
  8,634
  8,981
  9,348
  9,738
  10,150
  10,585
  11,046
  11,532
  12,045
  12,586
  13,156
  13,756
  14,389
  15,055
Issuance/(repayment) of debt, $m
  1,666
  1,092
  1,234
  1,411
  1,584
  1,755
  1,926
  2,097
  2,270
  2,446
  2,625
  2,808
  2,996
  3,190
  3,390
  3,597
  3,812
  4,036
  4,268
  4,509
  4,761
  5,024
  5,298
  5,584
  5,884
  6,197
  6,525
  6,868
  7,227
  7,603
  7,997
Issuance/(repurchase) of shares, $m
  -2,247
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -502
  1,092
  1,234
  1,411
  1,584
  1,755
  1,926
  2,097
  2,270
  2,446
  2,625
  2,808
  2,996
  3,190
  3,390
  3,597
  3,812
  4,036
  4,268
  4,509
  4,761
  5,024
  5,298
  5,584
  5,884
  6,197
  6,525
  6,868
  7,227
  7,603
  7,997
Total cash flow (excl. dividends), $m
  7,289
  6,977
  7,173
  7,423
  7,689
  7,971
  8,271
  8,589
  8,926
  9,282
  9,659
  9,771
  10,192
  10,636
  11,105
  11,599
  12,121
  12,670
  13,248
  13,857
  14,499
  15,173
  15,883
  16,630
  17,416
  18,242
  19,110
  20,023
  20,983
  21,992
  23,052
Retained Cash Flow (-), $m
  2,492
  -489
  -542
  -619
  -695
  -770
  -845
  -920
  -996
  -1,073
  -1,152
  -1,232
  -1,315
  -1,400
  -1,488
  -1,579
  -1,673
  -1,771
  -1,873
  -1,979
  -2,089
  -2,205
  -2,325
  -2,451
  -2,582
  -2,720
  -2,863
  -3,014
  -3,171
  -3,336
  -3,509
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  6,488
  6,632
  6,804
  6,994
  7,201
  7,426
  7,669
  7,929
  8,209
  8,507
  8,538
  8,877
  9,236
  9,617
  10,021
  10,448
  10,899
  11,375
  11,879
  12,409
  12,969
  13,558
  14,180
  14,834
  15,522
  16,247
  17,009
  17,811
  18,655
  19,542
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  6,144
  5,915
  5,685
  5,440
  5,181
  4,908
  4,621
  4,322
  4,014
  3,698
  3,269
  2,962
  2,657
  2,359
  2,070
  1,794
  1,534
  1,294
  1,075
  879
  707
  558
  433
  329
  245
  178
  126
  88
  59
  39
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

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.

FINANCIAL RATIOS  of  Coca-Cola (KO)

Valuation Ratios
P/E Ratio 30
Price to Sales 4.7
Price to Book 8.5
Price to Tangible Book
Price to Cash Flow 22.3
Price to Free Cash Flow 30
Growth Rates
Sales Growth Rate -5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.4%
Cap. Spend. - 3 Yr. Gr. Rate -2.4%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 128.7%
Total Debt to Equity 198.2%
Interest Coverage 13
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 8.2%
Return On Total Capital 9.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9.9%
Return On Equity 26.9%
Return On Equity - 3 Yr. Avg. 25.2%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 60.7%
Gross Margin - 3 Yr. Avg. 60.8%
EBITDA Margin 25.3%
EBITDA Margin - 3 Yr. Avg. 26.1%
Operating Margin 20.6%
Oper. Margin - 3 Yr. Avg. 20.4%
Pre-Tax Margin 19.4%
Pre-Tax Margin - 3 Yr. Avg. 20.5%
Net Profit Margin 15.6%
Net Profit Margin - 3 Yr. Avg. 15.9%
Effective Tax Rate 19.5%
Eff/ Tax Rate - 3 Yr. Avg. 22.1%
Payout Ratio 92.6%

KO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KO stock intrinsic value calculation we used $41863 million for the last fiscal year's total revenue generated by Coca-Cola. The default revenue input number comes from 2016 income statement of Coca-Cola. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our KO stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.6%, whose default value for KO is calculated based on our internal credit rating of Coca-Cola, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Coca-Cola.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of KO stock the variable cost ratio is equal to 80.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for KO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Coca-Cola.

Corporate tax rate of 27% is the nominal tax rate for Coca-Cola. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the KO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for KO are equal to 55.6%.

Life of production assets of 19.2 years is the average useful life of capital assets used in Coca-Cola operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for KO is equal to 2.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $23062 million for Coca-Cola - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 4323.29 million for Coca-Cola is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Coca-Cola at the current share price and the inputted number of shares is $197.4 billion.

RELATED COMPANIES Price Int.Val. Rating
COKE Coca-Cola Bott 204.67 690.33  str.buy
DPS Dr Pepper Snap 91.08 83.56  hold
PEP PepsiCo 117.60 57.05  sell
KOF Coca-Cola Fems 84.21 171.83  str.buy

COMPANY NEWS

▶ Arby's switching from Pepsi to Coke   [Aug-17-17 04:30PM  American City Business Journals]
▶ US Market Indexes Mostly Lower Tuesday   [Aug-16-17 11:06AM  GuruFocus.com]
▶ A Look at Coca-Colas Dividend Yield   [09:32AM  Market Realist]
▶ ETFs with exposure to The Coca-Cola Co. : August 14, 2017   [Aug-14-17 04:47PM  Capital Cube]
▶ Better Buy: McDonald's vs. Coca-Cola   [02:00PM  Motley Fool]
▶ What Is A Brand Really Worth?   [12:31PM  Forbes]
▶ How Safe Is Coca-Cola's Dividend?   [11:30AM  Motley Fool]
▶ What Drove Monster Beverages Fiscal 2Q17 Sales?   [Aug-11-17 03:35PM  Market Realist]
▶ Monster Beverage Falls Flat Despite Record Sales   [Aug-08-17 06:06PM  Motley Fool]
▶ How Soda Makers Are Secretly Getting You to Pay More Money   [Aug-06-17 03:20PM  TheStreet.com]
▶ Regular bottled water isnt enough for todays consumer   [Aug-04-17 11:54AM  Yahoo Finance]
▶ Value-added bottled water explodes in popularity   [10:36AM  Yahoo Finance Video]
▶ Yahoo Finance Live: Market Movers - Aug 4th, 2017   [07:20AM  Yahoo Finance Video]
▶ Analyzing Coca-Colas Margins in 2Q17   [07:37AM  Market Realist]
▶ The 3 Best Buffett Stocks for Retirees   [06:00AM  Motley Fool]
▶ Coca-Colas Volumes Fall a Little Flat in 2Q17   [10:38AM  Market Realist]
▶ Company News for July 27, 2017   [10:44AM  Zacks]
▶ Boeing Carries Dow Index to New Highs   [Jul-26-17 08:47PM  Investopedia]
▶ Coke tops 2Q profit forecasts   [08:35PM  Associated Press]
▶ Coke Zero gets makeover as Coke Zero Sugar   [06:24PM  Associated Press]
▶ Coke Zero Is Out. Coke Zero Sugar Is In.   [03:50PM  InvestorPlace]
▶ Coca-Cola Revamps Coke Zero   [12:53PM  Bloomberg]
▶ Coca-Cola: Losing Its Fizz?   [11:40AM  Barrons.com]
▶ Coca-Cola beats analysts' expectations   [08:28AM  CNBC Videos]
Stock chart of KO Financial statements of KO
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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