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    KO · NYQ · Consumer Defensive

    The Coca-Cola Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 41.49

    Market price

    USD 88.25

    Implied upside

    -53.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 4.1% of revenue against depreciation of 2.5%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 25.6x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 41.49-53.0%
    Exit multiple
    USD 63.80-27.7%
    Market price
    USD 88.25

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn11bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 49.7bnUSD 51.5bnUSD 53.4bnUSD 55.4bnUSD 57.5bn+3.7%
    EBITUSD 14.6bnUSD 15.1bnUSD 15.7bnUSD 16.3bnUSD 16.9bn+3.7%
    NOPATUSD 12.0bnUSD 12.4bnUSD 12.9bnUSD 13.4bnUSD 13.8bn+3.7%
    Add depreciation & amortisationUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.4bnUSD 1.4bn+3.7%
    Less capital expenditureUSD -2.0bnUSD -2.1bnUSD -2.2bnUSD -2.3bnUSD -2.3bn+3.7%
    Less increase in working capitalUSD -1.8bnUSD -1.8bnUSD -1.9bnUSD -2.0bnUSD -2.0bn+3.7%
    Free cashflow to firmUSD 9.4bnUSD 9.8bnUSD 10.1bnUSD 10.5bnUSD 10.9bn+3.7%
    Discount factor0.96380.89530.83170.77260.7177-
    Present valueUSD 9.1bnUSD 8.7bnUSD 8.4bnUSD 8.1bnUSD 7.8bn-3.7%
    Present Value Of The ForecastUSD 42.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.559Reported 0.342, pulled toward 1.0 (Blume)
    Cost of equity8.07%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 379.7bn89.3% of capital
    Total debtUSD 45.5bn10.7% of capital, book value as a proxy
    Tax rate18.0%Effective, capped at statutory
    WACC7.65%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 41.49

    80% of EV

    Forecast FCFF, final year
    USD 10.9bn
    Capex at depreciation, working capital in reinvestment
    USD 13.8bn
    Less reinvestment at g/ROIC (15.9% of NOPAT)
    USD -2.2bn
    Capitalised
    USD 11.7bn
    ROIC (reported)
    15.8%
    Terminal value, undiscounted
    USD 232.0bn
    Terminal value, discounted
    USD 166.5bn
    Enterprise value
    USD 208.6bn
    Less net debt
    USD 29.7bn
    Equity value
    USD 179.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 63.80

    86% of EV

    Terminal value, undiscounted
    USD 366.0bn
    Terminal value, discounted
    USD 262.7bn
    Enterprise value
    USD 304.8bn
    Less net debt
    USD 29.7bn
    Equity value
    USD 275.2bn

    Spread between methods: 42%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.65%58.8664.5572.0382.3197.33
    6.65%45.9849.1653.0858.0564.58
    7.65%37.3139.2241.4944.2347.62
    8.65%31.0732.2833.6835.3137.25
    9.65%26.3727.1628.0629.0730.25

    Outlined: this model. Green text: above today's price of 88.25. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year3.7%23.4%+19.7pp
    EBIT margin29.4%56.3%+26.9pp
    Discount rate7.6%5.1%-2.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.