Fundamental Analysis of Coca-Cola Company (Indian Equivalent)

Coca-Cola (NYSE: KO) is one of the most well-known consumer beverage companies globally. With a market capitalization of $ 290.81 billionThe company has maintained its Leadership in the Non-Alcoholic Beverage Industry for Decades. However, a fundamental analysis is Necessary to Assess Whiter Coca-Cola is a Strong long-term investment at its current price of $ 64.55 per share,

This report evaluates coca-coola’s financial health using its Profit & Loss Account, Balance Sheet, and Cash Flow Statements from the past four years (2020-2023). Additionally, we apply the Discounted Cash Flow (DCF) Method To estimate its intrinsic value and determine where the stock is overvalued or undervalized.

1. Revenue & Profitability Analysis

Coca-Cola has maintained stable revonsuth over the past four years:

Year	Revenue ($ Billion)	Net Income ($ Billion)	Diluteed EPS	Net margin (%)
Ttm	46.36	10.41	2.41	22.4%
2023	45.75	10.98	2.47	24.0%
2022	43.00	9.54	2.19	22.2%
2021	38.66	9.77	2.25	25.3%
2020	33.01	7.75	1.79	23.5%
Growth (Cagr)	7.84%	6.78%	6.83%	,

Key takeaways,

• Revenue Grew at a Cagr of 7.84% From 2020 to FY24 (TTM). It shown as devant post-pandemic recovery. Remember, these numbers must be viewed in terms of the US market.
• Net Income Improved, Reaching $ 10.41 billion In FY24 (TTM) From $ 7.75 in Year 2021. It grew at a Cagr of 6.78% per annum.
• The EPS (Earning per share) of the company also grew at 6.83% per annum between 2020 and fy24 (TTM).
• Coca-Cola Mantains A High Net Margin (~ 24%)Reflecting Strong Pricing Power and Cost Efficiency.

The company’s ability to Sustain High Margins Despite Inflationary Pressures and Currency Fluctations Highlights its pricing power and Brand Strength,

To get a relative personal percective of coca cola company with respect to a similar Indian company, let’s compare the numbers of coca cola with Varun beverages (Does bottling and distributed of pepsi outside us).

Year	Revenue (Rs.)	NET Profit (Rs.)	EPS	Net margin (%)
2024	20,128.92	2,594.63	7.67	12.89%
2023	16,121.94	2,055.92	15.82	12.75%
2022	13,211.99	1,497.43	23.05	11.33%
2021	8,891.16	694.05	16.03	7.81%
2020	6,487.11	329	11.4	5.07%
Growth (Cagr)	28.61%	58.24%	-8.43%	,

What distrusinguishes varun beverages (India) from coca cola (US) are the four key factors.

• On one side (Positive), Varun Beverages of India have shown a Stellar Growth of 28.61% in Revenue and 58.24% in Net Profit. In the similar period, the revionue and net profit growth of coca coal was only 7.85% and 6.78% respectively.
• On the other side (Negative), Varun Beverages of India has shown a negative EPS growth of -8.43% as compared to a positive grown of 6.85% of coca -coal. In terms of net margins, coca-coal company is much more profitable at about 24% compared to about 10% for varun beverages.

There are a set of pros and cons of varun beverage. These factors should have an influence on Valuation on the Valuation of these stocks. For me personally, factors like a negative Eps growth and low net margin should be a sure p/e deflator. But a strong revealed and profit growth works as an even better p/e inflation. See what is the result:

Name	P/e	Revenue Growth (%)	Profit Growth (%)	EPS Growth (%)	Net margin (%)
Coca Cola	27.48	7.84%	6.78%	6.83%	24%
Varun beverage	69.50	28.61%	58.24%	-8.43%	10%

2. Balance Sheet Strength

A Strong Balance Sheet is essential for a company’s Financial Health. Let’s review coca-Cola’s key Financial Position Indicators:

Year	Total Assets ($ B)	Total Liabilitys ($ B)	Equity ($ b)	Debt/equity ratio
2023	93.43	66.58	26.85	2.48
2022	92.81	65.20	27.61	2.36
2021	87.29	61.00	26.29	2.32
2020	86.38	62.00	24.38	2.54

Key takeaways: Coca-Cola has a High Debt-to-Equity Ratio (~ 2.5X)Meaning it funds operations with significant debt. Assets have grown steadily, While Equity have remained stable. The company’s level is high but manageable, give its Consistent Cash Flows,

While Coca-Cola’s High Debt Levels May Concern Some Investors, Strong Free Cash Flow Generation Ensures that debt obligations remain covered.

3. Cash Flow Strength

Free Cash Flow (FCF) is Crucial for Dividends, Debt Repayment, and Expansion. Below is coca-cola’s fcf performance:

Year	Operating cash flow ($ b)	Capex ($ b)	Free Cash Flow ($ B)
2023	12.40	2.65	9.75
2022	11.00	2.15	8.85
2021	10.50	1.85	8.65
2020	9.80	1.60	8.20

Key takeaways: Coca-Cola Generates Over $ 9 Billion in Annual FCFMaking It a Cash-Rich Company. The company invests Around $ 2-3 billion annually In Capital Expenditures (Capex). High fcf means coca-colla can comfortable pay dividends, repurchase shares, and service debt,

With Strong FCF, The Company Can MainTain and Increase DividendsWhich is a key attraction for income-focused investors.

4. Valuation Analysis

We apply the Discounted Cash Flow (DCF) Model to estimate coca-cola’s intrinsic value. Our assumptions:

• Free Cash Flow (FCF) Growth Rate: 4% (Moderate Scenario)
• Discount Rate (WACC): 8%
• Terminal Growth Rate: 2.5%

Step 4.1: Project Future Free Cash Flows (FCF)

We Assume 4% annual growth For the fcf for the next 5 years. Given 2023 fcf = $ 9.75 billionWe use the below formula:

FCF (Next Year) = FCF (Previous Year) × (1 + Growth Rate)

Year	FCF (Projected @4% Growth)
2024	9.75 × 1.04 = 10.14
2025	10.14 × 1.04 = 10.55
2026	10.55 × 1.04 = 10.97
2027	10.97 × 1.04 = 11.41
2028	11.41 × 1.04 = 11.87

Step 4.2: Calculate Terminal Value (TV)

Using the Gordon growth model,

TV = FCF (Last Year) × (1+G) / (WACC -G)

Where:

• G = 2.5% (0.025 Terminal Growth Rate)
• WACC = 8% (0.08 discount rate)
• FCF (2028) = $ 11.87B

TV = 11.87 * 1.025 / (0.8 – 0.25) = 12.16 / 0.055 = 221.09

So, The Calculated Terminal value of Coca Cola Company from Year 2028 and Beyond is $ 221.09 billion,

Step 4.3: discount all future cash flows to present value (PV)

Now, we discount all fcfs and tv using: pv = fcf (1+wacc) tpv = \ Frac {\ text {fcf}} {(1+wacc) {t} PV = (1+wacc) tfcf

Year	FCF (Billion)	Discount factor (8%)	Present Value (PV)
2024	10.14	1 / (1.08)^1 = 0.9259	10.14 × 0.9259 = 9.38
2025	10.55	1 / (1.08)^2 = 0.8573	10.55 × 0.8573 = 9.05
2026	10.97	1 / (1.08)^3 = 0.7938	10.97 × 0.7938 = 8.71
2027	11.41	1 / (1.08)^4 = 0.7350	11.41 × 0.7350 = 8.39
2028	11.87	1 / (1.08)^5 = 0.6806	11.87 × 0.6806 = 8.08
Terminal value	221.09	1 / (1.08)^5 = 0.6806	221.09 × 0.6806 = 150.49

Step 4.4: Sum All Present Values ​​of All Future Cash Flows

Enterprise value = Sum of present values

Enterprise Value = 9.38 + 9.05 + 8.71 + 8.39 + 8.08 + 150.49 = 194.10 billion

Step 4.5: Find Intrinsic Value Per Share

Now, we adjust for Cash, Debt, and Outstanding Shares,

• Market Cap: $ 290.81 billion
• Price / Share: $ 64.55
• Shares outstanding: 4.5 billion (approximate)

Intrinsic Value Per Share : Enterprise Value / Shares Outstanding = 194.10 / 4.5 = $43.13

Step 4.6 Comparison with Current Price

• Enterprise Value (EV) = $ 194.10 billion
• Shares outstanding = ~ 4.5 billion
• Intrinsic Value Per Share = $ 43.13
• Current price = $ 64.55

Since the intrinsic value ($ 43.13) is lower than the current price ($ 64.55)Coca-Cola appears overvalued Based on this DCF Model.

Key takeaways: Based on DCF Analysis, Coca-Cola’s Intrinsic Value is $ 43.13While the stock trades at $ 64.55This sugges the stock is Overvalued by ~ 50%Investors Buying at this price may not get exceptional returns unless Growth Exceds Expectations,

5. Risk Factors to Consider

Despite Its Strong Fundamentals, Coca-Cola Faces Some Risks:

• Declining Soda Consumption: Consures are Shifting Toward Healthier beveragesWhichwal Slow Growth in Carbonated Soft Drinks (CSD). However, Coca-Cola is expanding into Water, tea, coffee, and energy drinks To mitigate this risk.
• High debt levels: With a Debt-to-equity ratio of ~ 2.5xCoca-Cola Relies Heavily on Debt. Rising Interest Rates Cold Increase Borrowing Costs, Reducing Net Income.
• Currency fluctuations: As a global company, coca-coola earns revenue in multiple currency. A Strong USD Negatively impacts its International Revenue and Profit Margins.

Conclusion

Coca-Cola Remains A Financially Strong Company with Stable Revenue Growth, High Profitability, and Consistent Free Cash Flow (~ $ 9b Annually)ITS Global Brand Power and strong dividend payouts Make it a reliable choice for Income-focused investorsHowever, at the current price of $ 64.55Our DCF Analysis sugges the stock is slightly overvaluedWith an intrinsic value of $ 43.13,

While long-term investors may prefer to Wait for a Pullback Near $ 45- $ 50 For better value, dividend investors might still find coca-coola attractive due to its low beta (0.62) and Stable payouts,

That said, risks such as Declining Soda Consumption and high debt levels Warrant Careful Consideration.

Would you like to compare Relative Valuation Metrics (P/E, P/B) And D/E Ratio of Coca-Cola with the Indian Company Called Varun Beverages (Pepsico) For a broader personal? Here is a Quick Comparison:

Name	P/e	P/b	D/e
Coca Cola	27.48	19.58	2.425
Varun beverage	69.5	0.56	9.57

Have a happy investment.