Intrinsic value of Coca-Cola Femsa ADR - KOF

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$83.92

  Intrinsic Value

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  Value-price divergence*

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$83.92

 
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*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 5.7

 

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
  21.60
  19.94
  18.45
  17.10
  15.89
  14.80
  13.82
  12.94
  12.15
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
Revenue, $m
  9,004
  216,105
  259,196
  307,008
  359,510
  416,641
  478,313
  544,425
  614,872
  689,553
  768,377
  851,270
  938,178
  1,029,072
  1,123,947
  1,222,827
  1,325,762
  1,432,831
  1,544,139
  1,659,820
  1,780,031
  1,904,956
  2,034,805
  2,169,808
  2,310,222
  2,456,323
  2,608,412
  2,766,809
  2,931,857
  3,103,920
  3,283,385
Variable operating expenses, $m
 
  184,221
  220,449
  260,644
  304,784
  352,814
  404,662
  460,244
  519,469
  582,254
  648,522
  715,672
  788,737
  865,152
  944,915
  1,028,044
  1,114,583
  1,204,597
  1,298,175
  1,395,429
  1,496,491
  1,601,518
  1,710,683
  1,824,182
  1,942,229
  2,065,058
  2,192,921
  2,326,087
  2,464,844
  2,609,500
  2,760,378
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
  184,221
  220,449
  260,644
  304,784
  352,814
  404,662
  460,244
  519,469
  582,254
  648,522
  715,672
  788,737
  865,152
  944,915
  1,028,044
  1,114,583
  1,204,597
  1,298,175
  1,395,429
  1,496,491
  1,601,518
  1,710,683
  1,824,182
  1,942,229
  2,065,058
  2,192,921
  2,326,087
  2,464,844
  2,609,500
  2,760,378
Operating income, $m
  1,040
  31,884
  38,748
  46,364
  54,727
  63,827
  73,651
  84,181
  95,403
  107,299
  119,855
  135,598
  149,441
  163,920
  179,032
  194,783
  211,179
  228,234
  245,964
  264,391
  283,539
  303,438
  324,122
  345,626
  367,993
  391,265
  415,491
  440,722
  467,012
  494,420
  523,007
EBITDA, $m
  1,479
  43,124
  51,723
  61,264
  71,740
  83,141
  95,448
  108,640
  122,698
  137,601
  153,330
  169,871
  187,214
  205,352
  224,284
  244,016
  264,556
  285,922
  308,134
  331,218
  355,206
  380,135
  406,046
  432,986
  461,006
  490,160
  520,510
  552,118
  585,053
  619,388
  655,201
Interest expense (income), $m
  209
  4,658
  6,336
  8,223
  10,317
  12,616
  15,118
  17,818
  20,713
  23,798
  27,069
  30,521
  34,151
  37,956
  41,937
  46,091
  50,421
  54,929
  59,618
  64,492
  69,558
  74,822
  80,292
  85,979
  91,891
  98,039
  104,437
  111,097
  118,034
  125,261
  132,796
Earnings before tax, $m
  732
  27,226
  32,412
  38,141
  44,410
  51,211
  58,533
  66,363
  74,689
  83,500
  92,786
  105,077
  115,291
  125,963
  137,096
  148,692
  160,758
  173,305
  186,347
  199,899
  213,981
  228,617
  243,829
  259,648
  276,102
  293,226
  311,054
  329,625
  348,978
  369,159
  390,211
Tax expense, $m
  199
  7,351
  8,751
  10,298
  11,991
  13,827
  15,804
  17,918
  20,166
  22,545
  25,052
  28,371
  31,129
  34,010
  37,016
  40,147
  43,405
  46,792
  50,314
  53,973
  57,775
  61,726
  65,834
  70,105
  74,548
  79,171
  83,985
  88,999
  94,224
  99,673
  105,357
Net income, $m
  510
  19,875
  23,661
  27,843
  32,419
  37,384
  42,729
  48,445
  54,523
  60,955
  67,734
  76,706
  84,162
  91,953
  100,080
  108,545
  117,353
  126,513
  136,033
  145,926
  156,206
  166,890
  177,995
  189,543
  201,555
  214,055
  227,069
  240,626
  254,754
  269,486
  284,854

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
  324,970
  389,769
  461,666
  540,617
  626,528
  719,268
  818,684
  924,620
  1,036,922
  1,155,454
  1,280,105
  1,410,795
  1,547,477
  1,690,147
  1,838,838
  1,993,628
  2,154,633
  2,322,014
  2,495,969
  2,676,738
  2,864,596
  3,059,857
  3,262,870
  3,474,018
  3,693,719
  3,922,424
  4,160,615
  4,408,807
  4,667,549
  4,937,422
Adjusted assets (=assets-cash), $m
  13,618
  324,970
  389,769
  461,666
  540,617
  626,528
  719,268
  818,684
  924,620
  1,036,922
  1,155,454
  1,280,105
  1,410,795
  1,547,477
  1,690,147
  1,838,838
  1,993,628
  2,154,633
  2,322,014
  2,495,969
  2,676,738
  2,864,596
  3,059,857
  3,262,870
  3,474,018
  3,693,719
  3,922,424
  4,160,615
  4,408,807
  4,667,549
  4,937,422
Revenue / Adjusted assets
  0.661
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
Average production assets, $m
  6,990
  133,121
  159,665
  189,117
  221,458
  256,651
  294,641
  335,366
  378,761
  424,765
  473,320
  524,382
  577,918
  633,908
  692,352
  753,262
  816,670
  882,624
  951,190
  1,022,449
  1,096,499
  1,173,453
  1,253,440
  1,336,602
  1,423,097
  1,513,095
  1,606,782
  1,704,354
  1,806,024
  1,912,015
  2,022,565
Working capital, $m
  283
  -2,377
  -2,851
  -3,377
  -3,955
  -4,583
  -5,261
  -5,989
  -6,764
  -7,585
  -8,452
  -9,364
  -10,320
  -11,320
  -12,363
  -13,451
  -14,583
  -15,761
  -16,986
  -18,258
  -19,580
  -20,955
  -22,383
  -23,868
  -25,412
  -27,020
  -28,693
  -30,435
  -32,250
  -34,143
  -36,117
Total debt, $m
  4,518
  124,236
  161,236
  202,289
  247,370
  296,426
  349,380
  406,147
  466,636
  530,760
  598,442
  669,618
  744,242
  822,287
  903,752
  988,655
  1,077,039
  1,168,974
  1,264,548
  1,363,877
  1,467,095
  1,574,362
  1,685,856
  1,801,777
  1,922,342
  2,047,792
  2,178,382
  2,314,389
  2,456,107
  2,603,849
  2,757,946
Total liabilities, $m
  7,961
  185,558
  222,558
  263,611
  308,692
  357,748
  410,702
  467,469
  527,958
  592,082
  659,764
  730,940
  805,564
  883,609
  965,074
  1,049,977
  1,138,361
  1,230,296
  1,325,870
  1,425,199
  1,528,417
  1,635,684
  1,747,178
  1,863,099
  1,983,664
  2,109,114
  2,239,704
  2,375,711
  2,517,429
  2,665,171
  2,819,268
Total equity, $m
  6,188
  139,412
  167,211
  198,055
  231,925
  268,781
  308,566
  351,216
  396,662
  444,839
  495,690
  549,165
  605,231
  663,868
  725,073
  788,862
  855,266
  924,338
  996,144
  1,070,771
  1,148,321
  1,228,912
  1,312,679
  1,399,771
  1,490,354
  1,584,606
  1,682,720
  1,784,904
  1,891,378
  2,002,379
  2,118,154
Total liabilities and equity, $m
  14,149
  324,970
  389,769
  461,666
  540,617
  626,529
  719,268
  818,685
  924,620
  1,036,921
  1,155,454
  1,280,105
  1,410,795
  1,547,477
  1,690,147
  1,838,839
  1,993,627
  2,154,634
  2,322,014
  2,495,970
  2,676,738
  2,864,596
  3,059,857
  3,262,870
  3,474,018
  3,693,720
  3,922,424
  4,160,615
  4,408,807
  4,667,550
  4,937,422
Debt-to-equity ratio
  0.730
  0.890
  0.960
  1.020
  1.070
  1.100
  1.130
  1.160
  1.180
  1.190
  1.210
  1.220
  1.230
  1.240
  1.250
  1.250
  1.260
  1.260
  1.270
  1.270
  1.280
  1.280
  1.280
  1.290
  1.290
  1.290
  1.290
  1.300
  1.300
  1.300
  1.300
Adjusted equity ratio
  0.421
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  510
  19,875
  23,661
  27,843
  32,419
  37,384
  42,729
  48,445
  54,523
  60,955
  67,734
  76,706
  84,162
  91,953
  100,080
  108,545
  117,353
  126,513
  136,033
  145,926
  156,206
  166,890
  177,995
  189,543
  201,555
  214,055
  227,069
  240,626
  254,754
  269,486
  284,854
Depreciation, amort., depletion, $m
  439
  11,240
  12,975
  14,900
  17,014
  19,314
  21,797
  24,459
  27,295
  30,302
  33,475
  34,273
  37,772
  41,432
  45,252
  49,233
  53,377
  57,688
  62,169
  66,827
  71,667
  76,696
  81,924
  87,360
  93,013
  98,895
  105,018
  111,396
  118,041
  124,968
  132,194
Funds from operations, $m
  1,678
  31,115
  36,636
  42,743
  49,433
  56,698
  64,526
  72,904
  81,818
  91,257
  101,209
  110,980
  121,935
  133,385
  145,332
  157,778
  170,730
  184,201
  198,202
  212,753
  227,873
  243,586
  259,920
  276,903
  294,567
  312,950
  332,088
  352,022
  372,795
  394,454
  417,048
Change in working capital, $m
  34
  -422
  -474
  -526
  -578
  -628
  -678
  -727
  -775
  -821
  -867
  -912
  -956
  -1,000
  -1,044
  -1,088
  -1,132
  -1,178
  -1,224
  -1,272
  -1,322
  -1,374
  -1,428
  -1,485
  -1,545
  -1,607
  -1,673
  -1,742
  -1,816
  -1,893
  -1,974
Cash from operations, $m
  1,644
  20,697
  37,110
  43,268
  50,011
  57,326
  65,204
  73,631
  82,593
  92,079
  102,076
  111,892
  122,891
  134,385
  146,375
  158,865
  171,863
  185,378
  199,427
  214,025
  229,195
  244,961
  261,348
  278,388
  296,112
  314,557
  333,761
  353,764
  374,611
  396,347
  419,022
Maintenance CAPEX, $m
  0
  -7,151
  -8,701
  -10,436
  -12,361
  -14,474
  -16,775
  -19,258
  -21,919
  -24,756
  -27,762
  -30,936
  -34,273
  -37,772
  -41,432
  -45,252
  -49,233
  -53,377
  -57,688
  -62,169
  -66,827
  -71,667
  -76,696
  -81,924
  -87,360
  -93,013
  -98,895
  -105,018
  -111,396
  -118,041
  -124,968
New CAPEX, $m
  -643
  -23,712
  -26,544
  -29,452
  -32,342
  -35,193
  -37,990
  -40,725
  -43,395
  -46,003
  -48,556
  -51,062
  -53,536
  -55,991
  -58,443
  -60,910
  -63,408
  -65,954
  -68,566
  -71,259
  -74,050
  -76,954
  -79,987
  -83,162
  -86,495
  -89,998
  -93,686
  -97,572
  -101,670
  -105,991
  -110,550
Cash from investing activities, $m
  -1,364
  -30,863
  -35,245
  -39,888
  -44,703
  -49,667
  -54,765
  -59,983
  -65,314
  -70,759
  -76,318
  -81,998
  -87,809
  -93,763
  -99,875
  -106,162
  -112,641
  -119,331
  -126,254
  -133,428
  -140,877
  -148,621
  -156,683
  -165,086
  -173,855
  -183,011
  -192,581
  -202,590
  -213,066
  -224,032
  -235,518
Free cash flow, $m
  280
  -10,165
  1,865
  3,381
  5,308
  7,660
  10,440
  13,648
  17,278
  21,319
  25,758
  29,894
  35,082
  40,622
  46,500
  52,704
  59,222
  66,047
  73,173
  80,597
  88,319
  96,340
  104,665
  113,301
  122,258
  131,546
  141,179
  151,173
  161,545
  172,315
  183,503
Issuance/(repayment) of debt, $m
  157
  32,903
  37,000
  41,053
  45,081
  49,055
  52,954
  56,767
  60,489
  64,124
  67,682
  71,176
  74,624
  78,046
  81,464
  84,903
  88,385
  91,934
  95,574
  99,328
  103,219
  107,267
  111,494
  115,920
  120,566
  125,449
  130,590
  136,007
  141,718
  147,742
  154,097
Issuance/(repurchase) of shares, $m
  42
  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  
  -138
  32,903
  37,000
  41,053
  45,081
  49,055
  52,954
  56,767
  60,489
  64,124
  67,682
  71,176
  74,624
  78,046
  81,464
  84,903
  88,385
  91,934
  95,574
  99,328
  103,219
  107,267
  111,494
  115,920
  120,566
  125,449
  130,590
  136,007
  141,718
  147,742
  154,097
Total cash flow (excl. dividends), $m
  76
  22,737
  38,865
  44,434
  50,390
  56,715
  63,394
  70,415
  77,768
  85,444
  93,440
  101,069
  109,705
  118,668
  127,964
  137,606
  147,607
  157,981
  168,747
  179,926
  191,537
  203,607
  216,159
  229,222
  242,823
  256,995
  271,769
  287,180
  303,263
  320,057
  337,600
Retained Cash Flow (-), $m
  -881
  -24,797
  -27,799
  -30,844
  -33,870
  -36,856
  -39,785
  -42,650
  -45,446
  -48,178
  -50,850
  -53,475
  -56,066
  -58,637
  -61,205
  -63,789
  -66,405
  -69,071
  -71,806
  -74,627
  -77,550
  -80,591
  -83,767
  -87,093
  -90,583
  -94,252
  -98,114
  -102,184
  -106,475
  -111,000
  -115,775
Prev. year cash balance distribution, $m
 
  7,522
  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
 
  5,462
  11,066
  13,590
  16,519
  19,859
  23,609
  27,766
  32,321
  37,266
  42,590
  47,594
  53,640
  60,031
  66,759
  73,818
  81,202
  88,910
  96,941
  105,299
  113,988
  123,016
  132,392
  142,129
  152,241
  162,743
  173,655
  184,996
  196,789
  209,056
  221,825
Discount rate, %
 
  6.20
  6.51
  6.84
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.04
  20.00
  21.00
  22.05
  23.15
  24.30
  25.52
PV of cash for distribution, $m
 
  5,143
  9,755
  11,145
  12,519
  13,810
  14,950
  15,881
  16,553
  16,933
  17,001
  16,517
  16,004
  15,218
  14,199
  12,998
  11,671
  10,276
  8,867
  7,496
  6,204
  5,023
  3,977
  3,075
  2,321
  1,708
  1,224
  853
  578
  380
  242
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

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 341.1
Price to Sales 19.3
Price to Book 28.1
Price to Tangible Book
Price to Cash Flow 105.8
Price to Free Cash Flow 173.8
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 $177718 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 21.6% 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 6.2%, 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 5.1% 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 61.6%.

Life of production assets of 15.3 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 -1.1%. 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 - $122137 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 $5.7 billion.


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COMPANY NEWS

▶ 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]
▶ 3 Mexico Experts: Peso Rises, Week In Review   [06:13PM  at Barrons.com]
▶ 2016 Fourth Quarter and Full Year Results   [08:30AM  Marketwired]
▶ Unilever Stock Rises: Would It Spin Off EU Assets?   [Feb-22-17 03:56PM  at Barrons.com]
▶ 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]
▶ Trump Could Dump Nafta: How To Invest In Mexico   [Nov-16-16 01:12PM  at Barrons.com]
▶ Brazil's Ambev Has 20% Upside, J.P. Morgan Says   [Nov-10-16 12:08PM  at Barrons.com]
▶ 2016 Third Quarter and First Nine Months Results   [Oct-25-16 04:05PM  Marketwired]
▶ What Coty Brings To S&P 500: Brazil Consumer   [Sep-28-16 09:16AM  at Barrons.com]
▶ 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]
▶ 2015 Fourth Quarter and Full Year Results   [Feb-23-16 08:30AM  Marketwired]
▶ Coca-Cola FEMSA Announces Date for Shareholders' Meeting   [Feb-02-16 04:30PM  Marketwired]
▶ Coca-Cola FEMSA Fourth Quarter 2015 Conference Call   [Jan-25-16 09:37AM  at noodls]
Stock chart of KOF Financial statements of KOF Annual reports 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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