Coca cola - lost it's bubbles?
Posted: December 21st, 2019, 11:39 am
Hi folks,
After mentioning this stock (NYSE:KO) over in the US Shares thread I decided to take a look at the last 6 years worth of operating numbers. I must admit that although my earlier obsession with focussing almost exclusively on the ONs, was somewhat flawed, and that one also needs to temper this approach with a qualitative view on the sector, and the company's history and goverance. Indeed I was definitely caught out recently by buying A.G. Barr (BAG) too soon after their profit warning, and prior to doing more research.
However for my way of working, I think it's still better to look at the numbers first, and then focus on news, market sentiment and the company overview in more depth. I'm certainly glad I did that with Coca-cola since otherwise I would have probably burnt a lot of unnecessary time googling and reading various analyst/pundit write ups, since whilst I might missed something (please shout out if so) I did not find their numbers that impressive.
It's easy to spot that revenue has dropped every year since 2013. Earnings and EBIT have taken a similar fall, excepting from 2017 -> 2018 which presumably is mainly down to Trump's tax cuts.
Presumably the dividend growth of 7% against FCFps decline of 5%, means that the dividend has been funded by debt - possibly emphasised by a growing net debt metric?
All in all the numbers above are screaming at me, not to buy this share, and don't to spend any more time on research. Just for a hoot I'm sharing the DCF and EPV valuations my spreadsheet kicks out:
Of DCF analysis is pretty pointless in this case, since it assumes the FCFps is actually growing. But hey.
Earnings power value, if any of these techniques are actually realistic, would be appropriate since it assumes it models all profit being extracted for the owners' benefit and stay-in-business CAPEX, and none for reinvestment in growth.
Matt
(EDIT: the Stock price figures are in $, the main analyis ones are mostly $M)
After mentioning this stock (NYSE:KO) over in the US Shares thread I decided to take a look at the last 6 years worth of operating numbers. I must admit that although my earlier obsession with focussing almost exclusively on the ONs, was somewhat flawed, and that one also needs to temper this approach with a qualitative view on the sector, and the company's history and goverance. Indeed I was definitely caught out recently by buying A.G. Barr (BAG) too soon after their profit warning, and prior to doing more research.
However for my way of working, I think it's still better to look at the numbers first, and then focus on news, market sentiment and the company overview in more depth. I'm certainly glad I did that with Coca-cola since otherwise I would have probably burnt a lot of unnecessary time googling and reading various analyst/pundit write ups, since whilst I might missed something (please shout out if so) I did not find their numbers that impressive.
It's easy to spot that revenue has dropped every year since 2013. Earnings and EBIT have taken a similar fall, excepting from 2017 -> 2018 which presumably is mainly down to Trump's tax cuts.
Presumably the dividend growth of 7% against FCFps decline of 5%, means that the dividend has been funded by debt - possibly emphasised by a growing net debt metric?
All in all the numbers above are screaming at me, not to buy this share, and don't to spend any more time on research. Just for a hoot I'm sharing the DCF and EPV valuations my spreadsheet kicks out:
Of DCF analysis is pretty pointless in this case, since it assumes the FCFps is actually growing. But hey.
DCF initial growth 0.020 final 0.020 terminal 0.020 discounted @ 0.0891 | 22.14
DCF initial growth 0.030 final 0.025 terminal 0.020 discounted @ 0.0891 | 23.48
DCF initial growth 0.020 final 0.020 terminal 0.020 discounted @ 0.0771 | 24.82
DCF initial growth 0.030 final 0.025 terminal 0.020 discounted @ 0.0771 | 26.36
DCF initial growth 0.020 final 0.020 terminal 0.020 discounted @ 0.0721 | 27.20
DCF initial growth 0.030 final 0.025 terminal 0.020 discounted @ 0.0721 | 28.92
Earnings power value, if any of these techniques are actually realistic, would be appropriate since it assumes it models all profit being extracted for the owners' benefit and stay-in-business CAPEX, and none for reinvestment in growth.
EPV @ 0.0891 | 17.90
EPV @ 0.0771 | 20.61
EPV @ 0.0721 | 22.00
Matt
(EDIT: the Stock price figures are in $, the main analyis ones are mostly $M)
)