Coca Cola Valuation

Dear Reader,

Coca-Cola, the American multinational beverage corporation, is currently valued at 234.90 billion USD.

I estimate the real intrinsic value of Coca-Cola is 200 billion USD. Coca-Cola seems currently overvalued both on Price/Earnings and Price/Sales ratios given that it posted 4 years of negative revenue growth in the last 5 calendar years.

Yes, I know Coca-Cola has a strong brand, but globally the consumers are shifting to healthy foods and drinks which hurts Coca-Cola's main Coca Cola brand and its derivatives like Sprite and Fanta. Yes, Warren Buffett has a large stake in Coca-Cola and has long supported and liked the company in public.

But simply Coca-Cola, as far as I am concerned, is worth "only" around 200 billion USD and this can be justified only because of its high net profit margin of usually approximately 20 % on a yearly basis.

Coca-Cola's current fortunes resemble IBM's which recorded many consecutive quarters of declining year on year revenues. Yes, Coca-Cola has a healthy dividend of 3.1% and I do see why Warren Buffett likes the company. If one invests in Coca-Cola a large sum of money, many billions USD in Buffett's case, one can expect to redeem 100 % of the investment in 5 years with a capital profit of around 25 % and including in addition the 15 % dividends of the investment value. And such returns are not negligible for pension funds, large institutional asset management funds and insurance companies like Warren Buffett's Berkshire Hathaway.

All in all, however, I estimate Coca Cola's intrinsic value is 200 billion USD currently. Or with other words, Coca Cola is overvalued. One opportunity for Coca Cola is to use its large cash reserves and cash generating ability to enter new markets, especially healthy foods, drinks or coffee products, or buy up other beverage companies to achieve the growth that has eluded the company for years and increase its market value.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich