Friday, October 11, 2024

Analysis and overview of The Coca Cola Company and Free Cashflow to Equity forecast

 

About The Coca-Cola Company

The Coca-Cola Company is a total beverage company, and beverage products bearing its trademarks, sold in the United States since 1886, are now sold in more than 200 countries and territories. The Coca-Cola Company own or license and market numerous beverage brands, which group into the following categories: Trademark Coca-Cola; sparkling flavors; water, sports, coffee and tea; juice, value-added dairy and plant-based beverages; and emerging beverages. The Coca-Cola Company own and market several of the world s largest non-alcoholic sparkling soft drink brands, including Coca-Cola, Sprite, Fanta, Coca-Cola Zero Sugar and Diet Coke/Coca-Cola Light.

The Coca-Cola Company s success is its ability to connect with consumers by providing them with a wide variety of beverage options to meet their desires, needs and lifestyles.

 

Competition

In many of the countries, PepsiCo INC. is a primary competitor. Other significant competitors include, but are not limited to, Nestle S.A., Keurig Dr Pepper Inc., Danone S.A., Suntory Beverage & Food Limited, AB InBev, Kirin Holdings,Heineken N.V., Diageo and Red Bull GmbH.

 

 

FCFE Details of THE Coca Cola Company shown below, US$ in millions, except per share data, based on values on 10/10/2024

Year

Value

FCFE or Terminal Value

Present Value at 10%

0

FCFE0

12952

12952

1

FCFE1

14472= 12952 x (1+11.74%)

13157

2

FCFE2

15715 = 12952 x (1+ 8.59%)

12988

3

FCFE3

17065 = 12952 x (1+ 8.59%)

12822

4

FCFE4

18062 = 12952x (1+7.01%)

12473

5

FCFE5

19255= 17065 x (1+5.44%)

11956

5

Terminal Value (TV5)

445,241 = 14,013 x (1+5.44%) / (10% - 5.44%)

276459

Intrinsic value of The CocaCola Company

$352807

Market cap of THE Coca Cola Company.

$2.98 Billion

Intrinsic value of The CocaCola Company. common stock (per share)

$81.88

Current share price on 10/10/2024

$69.25

 

Required rate of Return

Assumptions

Rate of return on LT Treasury Composite(Rf)

4.36%

Expected rate of return on market portfolio(E(RM)

13.81%

Systematic risk of Intuit Inc. Common stock (β)

0.54

Required rate of return on Intuit Inc. Common Stock (r)

Calculation : Rf + β(E(RM)- (Rf) = 4.36% +0.59[13.81% - 4.36%]

10%

 

FCFE Growth rate (G) Forecast

THE Coca Cola Company. H-Model

Year

Value

g

1

g1 (PRAT Model)

11.74%

2

g2 (Linear Interpolation)

8.59%

3

g3 (Linear Interpolation)

8.59%

4

g4 (Linear Interpolation)

7.01%

5

g5 (Single stage model)

5.44%

 

2023 Calculations

Retention rate = (Net income Dividends on common stock) / Net income

= (9,074 7,952) / 9,074

= 25.7%

 

Gross Profit Margin = 100 X Gross profit /Revenue

= 100 X 27,234/45,754

= 53%

 

Profit margin = 100 X Net income / Revenue

= 100 X 10,703 / 45,754

= 23.3%

 

Asset turnover = Revenue / Total Assets

= 45,754 / 97,703

= 0.49

 

Financial leverage = Total Assets / Stockholders equity

= 45,754/ 25,941

= 1.76

 

Return on Investment = 100 X Profit before interest and taxes/Capital employed

= 100 X 14,479/63,027

=23%

 

 

 

Sources :Form 10K of THE Coca-Cola Company for the fiscal year 2023, https://investors.coca-colacompany.com/financial-information/financial-results, https://www.stock-analysis-on.net/ , https://finance.yahoo.com/ , https://companiesmarketcap.com/

 

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