Intrinsic value of Coca-Cola - KO

Previous Close

$46.62

  Intrinsic Value

$16.98

stock screener

  Rating & Target

str. sell

-64%

  Value-price divergence*

-32%

Previous close

$46.62

 
Intrinsic value

$16.98

 
Up/down potential

-64%

 
Rating

str. sell

 
Value-price divergence*

-32%

*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 199.5

 

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
 
  35,249
  36,035
  36,934
  37,943
  39,061
  40,288
  41,624
  43,070
  44,628
  46,300
  47,026
  48,934
  50,966
  53,126
  55,418
  57,846
  60,417
  63,136
  66,008
  69,041
  72,241
  75,616
  79,174
  82,922
  86,869
  91,026
  95,401
  100,004
  104,847
  109,942
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
  35,249
  36,035
  36,934
  37,943
  39,061
  40,288
  41,624
  43,070
  44,628
  46,300
  47,026
  48,934
  50,966
  53,126
  55,418
  57,846
  60,417
  63,136
  66,008
  69,041
  72,241
  75,616
  79,174
  82,922
  86,869
  91,026
  95,401
  100,004
  104,847
  109,942
Operating income, $m
  8,626
  7,451
  7,647
  7,871
  8,122
  8,401
  8,706
  9,039
  9,399
  9,787
  10,203
  11,712
  12,187
  12,693
  13,231
  13,802
  14,406
  15,047
  15,724
  16,439
  17,194
  17,992
  18,832
  19,718
  20,651
  21,635
  22,670
  23,759
  24,906
  26,112
  27,381
EBITDA, $m
  10,413
  9,751
  9,975
  10,231
  10,519
  10,838
  11,188
  11,569
  11,981
  12,426
  12,902
  13,413
  13,957
  14,537
  15,152
  15,806
  16,499
  17,232
  18,007
  18,827
  19,692
  20,604
  21,567
  22,582
  23,651
  24,777
  25,962
  27,210
  28,523
  29,904
  31,357
Interest expense (income), $m
  663
  1,039
  1,074
  1,113
  1,159
  1,209
  1,266
  1,327
  1,395
  1,468
  1,546
  1,630
  1,720
  1,816
  1,919
  2,027
  2,143
  2,265
  2,394
  2,531
  2,676
  2,829
  2,990
  3,160
  3,339
  3,528
  3,726
  3,936
  4,156
  4,388
  4,631
Earnings before tax, $m
  8,136
  6,412
  6,573
  6,757
  6,963
  7,191
  7,440
  7,711
  8,004
  8,319
  8,657
  10,081
  10,467
  10,877
  11,312
  11,774
  12,264
  12,782
  13,329
  13,908
  14,519
  15,163
  15,842
  16,558
  17,313
  18,107
  18,943
  19,824
  20,750
  21,724
  22,749
Tax expense, $m
  1,586
  1,731
  1,775
  1,825
  1,880
  1,942
  2,009
  2,082
  2,161
  2,246
  2,337
  2,722
  2,826
  2,937
  3,054
  3,179
  3,311
  3,451
  3,599
  3,755
  3,920
  4,094
  4,277
  4,471
  4,674
  4,889
  5,115
  5,352
  5,602
  5,866
  6,142
Net income, $m
  6,527
  4,681
  4,798
  4,933
  5,083
  5,250
  5,431
  5,629
  5,843
  6,073
  6,320
  7,359
  7,641
  7,940
  8,258
  8,595
  8,953
  9,331
  9,730
  10,153
  10,599
  11,069
  11,565
  12,088
  12,638
  13,218
  13,829
  14,471
  15,147
  15,859
  16,607

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
  66,099
  67,620
  69,358
  71,309
  73,470
  75,842
  78,425
  81,221
  84,234
  87,466
  90,925
  94,615
  98,544
  102,720
  107,151
  111,846
  116,817
  122,073
  127,627
  133,491
  139,679
  146,205
  153,083
  160,330
  167,963
  175,999
  184,458
  193,359
  202,724
  212,573
Adjusted assets (=assets-cash), $m
  64,754
  66,099
  67,620
  69,358
  71,309
  73,470
  75,842
  78,425
  81,221
  84,234
  87,466
  90,925
  94,615
  98,544
  102,720
  107,151
  111,846
  116,817
  122,073
  127,627
  133,491
  139,679
  146,205
  153,083
  160,330
  167,963
  175,999
  184,458
  193,359
  202,724
  212,573
Revenue / Adjusted assets
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
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
  30,679
  31,810
  33,103
  34,555
  36,163
  37,928
  39,850
  41,930
  44,171
  46,576
  49,149
  51,894
  54,818
  57,924
  61,221
  64,715
  68,413
  72,324
  76,456
  80,819
  85,422
  90,277
  95,395
  100,787
  106,465
  112,444
  118,738
  125,360
  132,327
  139,656
Total liabilities, $m
  64,208
  49,178
  50,309
  51,602
  53,054
  54,662
  56,427
  58,349
  60,429
  62,670
  65,075
  67,648
  70,393
  73,317
  76,423
  79,720
  83,214
  86,912
  90,823
  94,955
  99,318
  103,921
  108,776
  113,894
  119,286
  124,964
  130,943
  137,237
  143,859
  150,826
  158,155
Total equity, $m
  23,062
  16,921
  17,311
  17,756
  18,255
  18,808
  19,416
  20,077
  20,793
  21,564
  22,391
  23,277
  24,221
  25,227
  26,296
  27,431
  28,633
  29,905
  31,251
  32,673
  34,174
  35,758
  37,428
  39,189
  41,044
  42,998
  45,056
  47,221
  49,500
  51,897
  54,419
Total liabilities and equity, $m
  87,270
  66,099
  67,620
  69,358
  71,309
  73,470
  75,843
  78,426
  81,222
  84,234
  87,466
  90,925
  94,614
  98,544
  102,719
  107,151
  111,847
  116,817
  122,074
  127,628
  133,492
  139,679
  146,204
  153,083
  160,330
  167,962
  175,999
  184,458
  193,359
  202,723
  212,574
Debt-to-equity ratio
  1.982
  1.810
  1.840
  1.860
  1.890
  1.920
  1.950
  1.980
  2.020
  2.050
  2.080
  2.110
  2.140
  2.170
  2.200
  2.230
  2.260
  2.290
  2.310
  2.340
  2.360
  2.390
  2.410
  2.430
  2.460
  2.480
  2.500
  2.510
  2.530
  2.550
  2.570
Adjusted equity ratio
  0.201
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,527
  4,681
  4,798
  4,933
  5,083
  5,250
  5,431
  5,629
  5,843
  6,073
  6,320
  7,359
  7,641
  7,940
  8,258
  8,595
  8,953
  9,331
  9,730
  10,153
  10,599
  11,069
  11,565
  12,088
  12,638
  13,218
  13,829
  14,471
  15,147
  15,859
  16,607
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
  6,980
  7,126
  7,293
  7,480
  7,687
  7,913
  8,159
  8,425
  8,712
  9,019
  9,060
  9,411
  9,783
  10,180
  10,600
  11,045
  11,516
  12,014
  12,540
  13,096
  13,682
  14,300
  14,951
  15,638
  16,360
  17,121
  17,922
  18,765
  19,651
  20,584
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
  6,960
  7,103
  7,266
  7,450
  7,653
  7,876
  8,119
  8,382
  8,665
  8,969
  9,007
  9,353
  9,723
  10,115
  10,531
  10,972
  11,439
  11,933
  12,454
  13,005
  13,586
  14,199
  14,845
  15,525
  16,242
  16,997
  17,791
  18,627
  19,506
  20,431
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
  5,281
  5,320
  5,377
  5,452
  5,543
  5,650
  5,773
  5,911
  6,064
  6,232
  6,128
  6,327
  6,541
  6,772
  7,018
  7,281
  7,561
  7,859
  8,176
  8,511
  8,866
  9,242
  9,639
  10,058
  10,501
  10,968
  11,460
  11,979
  12,525
  13,101
Issuance/(repayment) of debt, $m
  1,666
  995
  1,131
  1,293
  1,452
  1,608
  1,765
  1,922
  2,080
  2,241
  2,405
  2,573
  2,746
  2,923
  3,107
  3,297
  3,494
  3,698
  3,911
  4,132
  4,363
  4,604
  4,855
  5,117
  5,392
  5,679
  5,979
  6,293
  6,622
  6,967
  7,328
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
  995
  1,131
  1,293
  1,452
  1,608
  1,765
  1,922
  2,080
  2,241
  2,405
  2,573
  2,746
  2,923
  3,107
  3,297
  3,494
  3,698
  3,911
  4,132
  4,363
  4,604
  4,855
  5,117
  5,392
  5,679
  5,979
  6,293
  6,622
  6,967
  7,328
Total cash flow (excl. dividends), $m
  7,289
  6,276
  6,451
  6,670
  6,903
  7,151
  7,415
  7,694
  7,991
  8,305
  8,637
  8,701
  9,073
  9,465
  9,878
  10,315
  10,775
  11,259
  11,770
  12,308
  12,874
  13,470
  14,097
  14,757
  15,450
  16,180
  16,947
  17,754
  18,601
  19,492
  20,429
Retained Cash Flow (-), $m
  2,492
  -350
  -389
  -445
  -499
  -553
  -607
  -661
  -716
  -771
  -828
  -885
  -945
  -1,006
  -1,069
  -1,134
  -1,202
  -1,272
  -1,346
  -1,422
  -1,501
  -1,584
  -1,671
  -1,761
  -1,855
  -1,954
  -2,057
  -2,165
  -2,279
  -2,397
  -2,522
Prev. year cash balance distribution, $m
 
  6,491
  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
 
  12,416
  6,062
  6,225
  6,404
  6,598
  6,808
  7,033
  7,275
  7,534
  7,810
  7,816
  8,128
  8,459
  8,809
  9,180
  9,572
  9,987
  10,424
  10,886
  11,373
  11,886
  12,426
  12,996
  13,595
  14,226
  14,890
  15,588
  16,323
  17,095
  17,907
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
 
  11,758
  5,407
  5,201
  4,981
  4,747
  4,499
  4,238
  3,966
  3,684
  3,395
  2,992
  2,712
  2,434
  2,161
  1,896
  1,644
  1,406
  1,186
  985
  806
  648
  512
  397
  301
  224
  163
  116
  80
  54
  36
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 is a beverage company. The Company owns or licenses and markets non-alcoholic beverage brands, primarily sparkling beverages and a range of still beverages, such as waters, flavored waters and enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, sports drinks, dairy and energy drinks. The Company's segments include Europe, Middle East and Africa; Latin America; North America; Asia Pacific; Bottling Investments, and Corporate. The Company owns and markets a range of non-alcoholic sparkling beverage brands, including Coca-Cola, Diet Coke, Fanta and Sprite. The Company owns or licenses and markets over 500 non-alcoholic beverage brands. The Company markets, manufactures and sells beverage concentrates, which are referred to as beverage bases, and syrups, including fountain syrups, and finished sparkling and still beverages.

FINANCIAL RATIOS  of  Coca-Cola (KO)

Valuation Ratios
P/E Ratio 30.6
Price to Sales 4.8
Price to Book 8.7
Price to Tangible Book
Price to Cash Flow 22.7
Price to Free Cash Flow 30.6
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. 18.8%
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 82.6%.

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 4280.23 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 $199.5 billion.

RELATED COMPANIES Price Int.Val. Rating
COKE Coca-Cola Bott 227.10 713.58  str.buy
DPS Dr Pepper Snap 89.63 130.83  buy
PEP PepsiCo 113.57 59.66  sell
KOF Coca-Cola Fems 70.71 160.52  str.buy

COMPANY NEWS

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▶ The Fed Is Trumponomics Dependent   [Sep-19-17 09:54PM  Forbes]
▶ McDonald's making changes to its famed Happy Meal   [Sep-18-17 02:43PM  American City Business Journals]
▶ Natural Alternatives to Sports Drinks - Buying Guide   [Sep-17-17 03:00PM  TheStreet.com]
▶ [$$] McDonalds Is Trying to Make the Happy Meal HealthierAgain   [Sep-15-17 11:42PM  The Wall Street Journal]
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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