Intrinsic value of Coca-Cola Femsa ADR - KOF

Previous Close

$84.21

  Intrinsic Value

$166.59

stock screener

  Rating & Target

str. buy

+98%

  Value-price divergence*

+3511%

Previous close

$84.21

 
Intrinsic value

$166.59

 
Up/down potential

+98%

 
Rating

str. buy

 
Value-price divergence*

+3511%

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

We calculate the intrinsic value of KOF 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 5.8

 

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, %
  16.63
  39.90
  36.41
  33.27
  30.44
  27.90
  25.61
  23.55
  21.69
  20.02
  18.52
  17.17
  15.95
  14.86
  13.87
  12.98
  12.19
  11.47
  10.82
  10.24
  9.71
  9.24
  8.82
  8.44
  8.09
  7.78
  7.51
  7.25
  7.03
  6.83
  6.64
Revenue, $m
  9,004
  12,597
  17,183
  22,900
  29,871
  38,204
  47,987
  59,287
  72,148
  86,594
  102,633
  120,253
  139,436
  160,152
  182,367
  206,045
  231,153
  257,660
  285,539
  314,774
  345,352
  377,273
  410,544
  445,181
  481,210
  518,667
  557,596
  598,049
  640,088
  683,783
  729,213
Variable operating expenses, $m
 
  10,702
  14,537
  19,317
  25,145
  32,113
  40,293
  49,741
  60,494
  72,572
  85,982
  100,545
  116,584
  133,904
  152,479
  172,276
  193,269
  215,432
  238,742
  263,185
  288,752
  315,442
  343,259
  372,220
  402,344
  433,662
  466,210
  500,033
  535,183
  571,717
  609,701
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
  7,964
  10,702
  14,537
  19,317
  25,145
  32,113
  40,293
  49,741
  60,494
  72,572
  85,982
  100,545
  116,584
  133,904
  152,479
  172,276
  193,269
  215,432
  238,742
  263,185
  288,752
  315,442
  343,259
  372,220
  402,344
  433,662
  466,210
  500,033
  535,183
  571,717
  609,701
Operating income, $m
  1,040
  1,894
  2,646
  3,583
  4,725
  6,091
  7,695
  9,547
  11,654
  14,022
  16,651
  19,709
  22,852
  26,248
  29,888
  33,769
  37,884
  42,228
  46,798
  51,589
  56,600
  61,832
  67,285
  72,961
  78,866
  85,005
  91,385
  98,015
  104,905
  112,066
  119,512
EBITDA, $m
  1,479
  2,576
  3,514
  4,683
  6,109
  7,813
  9,814
  12,125
  14,756
  17,710
  20,990
  24,594
  28,517
  32,754
  37,298
  42,140
  47,275
  52,697
  58,398
  64,378
  70,631
  77,160
  83,964
  91,048
  98,417
  106,078
  114,039
  122,313
  130,911
  139,847
  149,139
Interest expense (income), $m
  209
  231
  396
  607
  870
  1,190
  1,573
  2,022
  2,541
  3,132
  3,796
  4,533
  5,342
  6,224
  7,176
  8,196
  9,284
  10,438
  11,655
  12,936
  14,279
  15,684
  17,151
  18,680
  20,271
  21,926
  23,647
  25,436
  27,294
  29,226
  31,233
Earnings before tax, $m
  732
  1,663
  2,250
  2,976
  3,856
  4,901
  6,122
  7,524
  9,113
  10,890
  12,855
  15,176
  17,510
  20,024
  22,713
  25,573
  28,600
  31,791
  35,142
  38,652
  42,321
  46,148
  50,134
  54,282
  58,595
  63,079
  67,738
  72,579
  77,611
  82,841
  88,279
Tax expense, $m
  199
  449
  607
  804
  1,041
  1,323
  1,653
  2,032
  2,460
  2,940
  3,471
  4,097
  4,728
  5,406
  6,132
  6,905
  7,722
  8,583
  9,488
  10,436
  11,427
  12,460
  13,536
  14,656
  15,821
  17,031
  18,289
  19,596
  20,955
  22,367
  23,835
Net income, $m
  510
  1,214
  1,642
  2,172
  2,815
  3,578
  4,469
  5,493
  6,652
  7,949
  9,384
  11,078
  12,782
  14,617
  16,580
  18,668
  20,878
  23,207
  25,654
  28,216
  30,894
  33,688
  36,598
  39,626
  42,775
  46,048
  49,449
  52,983
  56,656
  60,474
  64,443

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  531
  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
  14,149
  19,057
  25,995
  34,644
  45,190
  57,797
  72,598
  89,693
  109,150
  131,005
  155,269
  181,927
  210,948
  242,288
  275,896
  311,718
  349,703
  389,803
  431,981
  476,209
  522,470
  570,762
  621,096
  673,497
  728,004
  784,670
  843,564
  904,763
  968,363
  1,034,468
  1,103,197
Adjusted assets (=assets-cash), $m
  13,618
  19,057
  25,995
  34,644
  45,190
  57,797
  72,598
  89,693
  109,150
  131,005
  155,269
  181,927
  210,948
  242,288
  275,896
  311,718
  349,703
  389,803
  431,981
  476,209
  522,470
  570,762
  621,096
  673,497
  728,004
  784,670
  843,564
  904,763
  968,363
  1,034,468
  1,103,197
Revenue / Adjusted assets
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
Average production assets, $m
  6,990
  9,775
  13,334
  17,770
  23,180
  29,646
  37,238
  46,007
  55,987
  67,197
  79,643
  93,317
  108,203
  124,278
  141,517
  159,891
  179,375
  199,944
  221,579
  244,265
  267,994
  292,764
  318,582
  345,461
  373,419
  402,486
  432,694
  464,086
  496,708
  530,616
  565,869
Working capital, $m
  283
  -126
  -172
  -229
  -299
  -382
  -480
  -593
  -721
  -866
  -1,026
  -1,203
  -1,394
  -1,602
  -1,824
  -2,060
  -2,312
  -2,577
  -2,855
  -3,148
  -3,454
  -3,773
  -4,105
  -4,452
  -4,812
  -5,187
  -5,576
  -5,980
  -6,401
  -6,838
  -7,292
Total debt, $m
  4,518
  7,477
  11,452
  16,408
  22,451
  29,675
  38,156
  47,951
  59,100
  71,623
  85,526
  100,801
  117,430
  135,388
  154,645
  175,171
  196,937
  219,914
  244,082
  269,425
  295,932
  323,603
  352,445
  382,471
  413,703
  446,173
  479,919
  514,986
  551,429
  589,307
  628,689
Total liabilities, $m
  7,961
  10,920
  14,895
  19,851
  25,894
  33,118
  41,599
  51,394
  62,543
  75,066
  88,969
  104,244
  120,873
  138,831
  158,088
  178,614
  200,380
  223,357
  247,525
  272,868
  299,375
  327,046
  355,888
  385,914
  417,146
  449,616
  483,362
  518,429
  554,872
  592,750
  632,132
Total equity, $m
  6,188
  8,137
  11,100
  14,793
  19,296
  24,679
  30,999
  38,299
  46,607
  55,939
  66,300
  77,683
  90,075
  103,457
  117,807
  133,104
  149,323
  166,446
  184,456
  203,341
  223,095
  243,715
  265,208
  287,583
  310,858
  335,054
  360,202
  386,334
  413,491
  441,718
  471,065
Total liabilities and equity, $m
  14,149
  19,057
  25,995
  34,644
  45,190
  57,797
  72,598
  89,693
  109,150
  131,005
  155,269
  181,927
  210,948
  242,288
  275,895
  311,718
  349,703
  389,803
  431,981
  476,209
  522,470
  570,761
  621,096
  673,497
  728,004
  784,670
  843,564
  904,763
  968,363
  1,034,468
  1,103,197
Debt-to-equity ratio
  0.730
  0.920
  1.030
  1.110
  1.160
  1.200
  1.230
  1.250
  1.270
  1.280
  1.290
  1.300
  1.300
  1.310
  1.310
  1.320
  1.320
  1.320
  1.320
  1.320
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
Adjusted equity ratio
  0.421
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  510
  1,214
  1,642
  2,172
  2,815
  3,578
  4,469
  5,493
  6,652
  7,949
  9,384
  11,078
  12,782
  14,617
  16,580
  18,668
  20,878
  23,207
  25,654
  28,216
  30,894
  33,688
  36,598
  39,626
  42,775
  46,048
  49,449
  52,983
  56,656
  60,474
  64,443
Depreciation, amort., depletion, $m
  439
  682
  868
  1,100
  1,384
  1,722
  2,120
  2,579
  3,101
  3,688
  4,340
  4,886
  5,665
  6,507
  7,409
  8,371
  9,391
  10,468
  11,601
  12,789
  14,031
  15,328
  16,680
  18,087
  19,551
  21,073
  22,654
  24,298
  26,006
  27,781
  29,627
Funds from operations, $m
  1,678
  1,896
  2,511
  3,273
  4,198
  5,300
  6,589
  8,072
  9,754
  11,638
  13,724
  15,964
  18,447
  21,124
  23,990
  27,040
  30,269
  33,675
  37,255
  41,005
  44,925
  49,016
  53,277
  57,713
  62,325
  67,120
  72,103
  77,281
  82,662
  88,255
  94,070
Change in working capital, $m
  34
  -36
  -46
  -57
  -70
  -83
  -98
  -113
  -129
  -144
  -160
  -176
  -192
  -207
  -222
  -237
  -251
  -265
  -279
  -292
  -306
  -319
  -333
  -346
  -360
  -375
  -389
  -405
  -420
  -437
  -454
Cash from operations, $m
  1,644
  1,932
  2,556
  3,330
  4,268
  5,384
  6,687
  8,185
  9,882
  11,782
  13,884
  16,140
  18,639
  21,331
  24,212
  27,276
  30,520
  33,941
  37,533
  41,297
  45,231
  49,335
  53,610
  58,059
  62,686
  67,495
  72,492
  77,685
  83,082
  88,692
  94,524
Maintenance CAPEX, $m
  0
  -366
  -512
  -698
  -930
  -1,214
  -1,552
  -1,950
  -2,409
  -2,931
  -3,518
  -4,170
  -4,886
  -5,665
  -6,507
  -7,409
  -8,371
  -9,391
  -10,468
  -11,601
  -12,789
  -14,031
  -15,328
  -16,680
  -18,087
  -19,551
  -21,073
  -22,654
  -24,298
  -26,006
  -27,781
New CAPEX, $m
  -643
  -2,785
  -3,559
  -4,436
  -5,410
  -6,467
  -7,592
  -8,769
  -9,980
  -11,210
  -12,446
  -13,674
  -14,886
  -16,075
  -17,239
  -18,375
  -19,484
  -20,569
  -21,635
  -22,686
  -23,729
  -24,771
  -25,818
  -26,878
  -27,959
  -29,066
  -30,208
  -31,392
  -32,623
  -33,908
  -35,253
Cash from investing activities, $m
  -1,364
  -3,151
  -4,071
  -5,134
  -6,340
  -7,681
  -9,144
  -10,719
  -12,389
  -14,141
  -15,964
  -17,844
  -19,772
  -21,740
  -23,746
  -25,784
  -27,855
  -29,960
  -32,103
  -34,287
  -36,518
  -38,802
  -41,146
  -43,558
  -46,046
  -48,617
  -51,281
  -54,046
  -56,921
  -59,914
  -63,034
Free cash flow, $m
  280
  -1,220
  -1,514
  -1,804
  -2,072
  -2,297
  -2,457
  -2,534
  -2,506
  -2,359
  -2,080
  -1,703
  -1,132
  -409
  466
  1,493
  2,665
  3,980
  5,431
  7,010
  8,713
  10,533
  12,464
  14,501
  16,640
  18,878
  21,211
  23,639
  26,162
  28,778
  31,490
Issuance/(repayment) of debt, $m
  157
  3,114
  3,976
  4,956
  6,043
  7,224
  8,481
  9,795
  11,149
  12,523
  13,903
  15,275
  16,629
  17,958
  19,257
  20,526
  21,765
  22,978
  24,168
  25,342
  26,508
  27,671
  28,841
  30,026
  31,233
  32,470
  33,746
  35,068
  36,443
  37,878
  39,381
Issuance/(repurchase) of shares, $m
  42
  1,111
  1,320
  1,520
  1,689
  1,805
  1,851
  1,807
  1,656
  1,383
  977
  305
  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  
  -138
  4,225
  5,296
  6,476
  7,732
  9,029
  10,332
  11,602
  12,805
  13,906
  14,880
  15,580
  16,629
  17,958
  19,257
  20,526
  21,765
  22,978
  24,168
  25,342
  26,508
  27,671
  28,841
  30,026
  31,233
  32,470
  33,746
  35,068
  36,443
  37,878
  39,381
Total cash flow (excl. dividends), $m
  76
  3,005
  3,782
  4,672
  5,660
  6,732
  7,874
  9,069
  10,298
  11,546
  12,800
  13,876
  15,497
  17,549
  19,724
  22,019
  24,431
  26,958
  29,599
  32,353
  35,221
  38,204
  41,305
  44,527
  47,873
  51,348
  54,957
  58,707
  62,604
  66,656
  70,871
Retained Cash Flow (-), $m
  -881
  -2,325
  -2,963
  -3,693
  -4,503
  -5,383
  -6,320
  -7,300
  -8,308
  -9,332
  -10,360
  -11,383
  -12,392
  -13,382
  -14,351
  -15,296
  -16,219
  -17,123
  -18,010
  -18,885
  -19,754
  -20,621
  -21,493
  -22,375
  -23,275
  -24,197
  -25,147
  -26,132
  -27,157
  -28,227
  -29,347
Prev. year cash balance distribution, $m
 
  376
  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
 
  1,056
  819
  979
  1,156
  1,349
  1,554
  1,769
  1,990
  2,214
  2,439
  2,493
  3,105
  4,166
  5,373
  6,723
  8,211
  9,835
  11,589
  13,468
  15,467
  17,584
  19,813
  22,152
  24,598
  27,151
  29,810
  32,575
  35,447
  38,430
  41,524
Discount rate, %
 
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
 
  999
  729
  815
  896
  965
  1,020
  1,057
  1,073
  1,070
  1,045
  939
  1,017
  1,174
  1,287
  1,352
  1,368
  1,340
  1,271
  1,171
  1,049
  913
  774
  638
  512
  400
  303
  223
  160
  111
  75
Current shareholders' claim on cash, %
  100
  83.0
  70.7
  61.6
  54.9
  49.9
  46.1
  43.4
  41.5
  40.2
  39.5
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3
  39.3

Coca-Cola FEMSA, S.A.B. de C.V., a franchise bottler, produces, markets, sells, and distributes Coca-Cola trademark beverages. The company offers sparkling beverages, including colas and flavored sparkling beverages; and waters and still beverages comprising juice drinks, coffee, teas, milk, value-added dairy, and isotonic drinks, as well as sells and distributes beer. It sells its products through distribution centers and retailers in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Brazil, Argentina, and the Philippines. The company was founded in 1979 and is based in Mexico, Mexico.

FINANCIAL RATIOS  of  Coca-Cola Femsa ADR (KOF)

Valuation Ratios
P/E Ratio 342.3
Price to Sales 19.4
Price to Book 28.2
Price to Tangible Book
Price to Cash Flow 106.2
Price to Free Cash Flow 174.4
Growth Rates
Sales Growth Rate 16.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.3%
Cap. Spend. - 3 Yr. Gr. Rate 1.4%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 70.5%
Total Debt to Equity 73%
Interest Coverage 5
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 5.8%
Return On Equity 8.9%
Return On Equity - 3 Yr. Avg. 9.4%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 44.8%
Gross Margin - 3 Yr. Avg. 46.2%
EBITDA Margin 15.3%
EBITDA Margin - 3 Yr. Avg. 16.4%
Operating Margin 11.6%
Oper. Margin - 3 Yr. Avg. 13.5%
Pre-Tax Margin 8.1%
Pre-Tax Margin - 3 Yr. Avg. 9.3%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate 27.2%
Eff/ Tax Rate - 3 Yr. Avg. 27.9%
Payout Ratio 69.6%

KOF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KOF stock intrinsic value calculation we used $9004 million for the last fiscal year's total revenue generated by Coca-Cola Femsa ADR. The default revenue input number comes from 2016 income statement of Coca-Cola Femsa ADR. 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 KOF stock valuation model: a) initial revenue growth rate of 39.9% 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 5.7%, whose default value for KOF is calculated based on our internal credit rating of Coca-Cola Femsa ADR, 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 Femsa ADR.
    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 KOF stock the variable cost ratio is equal to 85.5%.

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 KOF 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 5.3% for Coca-Cola Femsa ADR.

Corporate tax rate of 27% is the nominal tax rate for Coca-Cola Femsa ADR. 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 KOF 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 KOF are equal to 77.6%.

Life of production assets of 19.1 years is the average useful life of capital assets used in Coca-Cola Femsa ADR 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 KOF is equal to -1%. 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 - $6188 million for Coca-Cola Femsa ADR - 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 68.427 million for Coca-Cola Femsa ADR 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 Femsa ADR at the current share price and the inputted number of shares is $5.8 billion.

RELATED COMPANIES Price Int.Val. Rating
FMX Fomento Econom 101.01 246.62  str.buy
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COKE Coca-Cola Bott 204.67 690.33  str.buy

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▶ Coca-Cola FEMSA posts 2Q profit   [Jul-24-17 07:37PM  Associated Press]
▶ Coca-Cola FEMSA Second Quarter 2017 Conference Call   [Jul-06-17 04:12PM  Marketwired]
▶ Coca-Cola FEMSA Scraps Plans for US Operations   [May-16-17 06:18PM  Investopedia]
▶ Coca-Cola FEMSA CEO: Tax sugar, not soft drinks   [May-10-17 09:41AM  American City Business Journals]
▶ 2017 First Quarter Results   [09:10AM  Marketwired]
▶ 3 Mexico Experts: Peso Rises, Week In Review   [Feb-24-17 06:13PM  Barrons.com]
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▶ Coca-Cola FEMSA Fourth Quarter 2016 Conference Call   [Feb-07-17 04:20PM  Marketwired]
▶ Is Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (KOF) a Good Buy?   [Dec-12-16 05:04PM  at Insider Monkey]
▶ Mexico Hikes Interest Rate, What's Next For Peso?   [Nov-18-16 10:04AM  at Barrons.com]
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▶ 2016 Third Quarter and First Nine Months Results   [Oct-25-16 04:05PM  Marketwired]
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▶ Coke Brazil Purchase 'Unexpected,' Market Cheers   [Sep-23-16 04:33PM  at Barrons.com]
▶ Coca-Cola FEMSA Second Quarter 2016 Conference Call   [Jul-05-16 05:01PM  Marketwired]
▶ 2016 First Quarter Results   [Apr-27-16 08:30AM  Marketwired]
▶ COCA COLA FEMSA SAB DE CV Financials   [01:04PM  EDGAR Online Financials]
Stock chart of KOF Financial statements of KOF
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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