{"id":113510,"date":"2019-03-02T12:02:49","date_gmt":"2019-03-02T09:02:49","guid":{"rendered":"http:\/\/ww-vb.mine.nu\/w108\/is-the-coca-cola-company-nyseko-worth-us45-96-based-on-intrinsic-value-2\/"},"modified":"2019-03-02T12:02:49","modified_gmt":"2019-03-02T09:02:49","slug":"is-the-coca-cola-company-nyseko-worth-us45-96-based-on-intrinsic-value-2","status":"publish","type":"post","link":"https:\/\/hameed.nwar.uk\/sa\/is-the-coca-cola-company-nyseko-worth-us45-96-based-on-intrinsic-value-2\/","title":{"rendered":"Is The Coca-Cola Company (NYSE:KO) Worth US$45.96 Based On Intrinsic Value?"},"content":{"rendered":"

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How far off is The Coca-Cola Company (NYSE:KO<\/a>) from its intrinsic value? Using the most recent financial data, I am going to take a look at whether the stock is fairly priced by estimating the company\u2019s future cash flows and discounting them to their present value. I will be using the discounted cash flows (DCF) model. It may sound complicated, but actually it is quite simple! If you want to learn more about discounted cash flow, the basis for my calcs can be read in detail in the Simply Wall St analysis model<\/a>. If you are reading this and its not September 2018 then I highly recommend you check out the latest calculation for Coca-Cola by following the link below.<\/p>\n

Check out our latest analysis for Coca-Cola <\/a> <\/span><\/p>\n

What\u2019s the value?<\/h3>\n

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second \u2018steady growth\u2019 period. To begin with we have to get estimates of the next five years of cash flows. For this I used the consensus of the analysts covering the stock, as you can see below. I then discount this to its value today and sum up the total to get the present value of these cash flows.<\/p>\n

5-year cash flow estimate<\/h4>\n
\n\n\n\n\n\n\n
2019<\/strong><\/td>\n2020<\/strong><\/td>\n2021<\/strong><\/td>\n2022<\/strong><\/td>\n2023<\/strong><\/td>\n<\/tr>\n
Levered FCF ($, Millions)<\/strong> <\/td>\n$8.46k<\/td>\n$9.18k<\/td>\n$9.54k<\/td>\n$10.45k<\/td>\n$9.75k<\/td>\n<\/tr>\n
Source<\/strong> <\/td>\nAnalyst x9<\/td>\nAnalyst x8<\/td>\nAnalyst x1<\/td>\nAnalyst x1<\/td>\nEst @ -6.7%<\/td>\n<\/tr>\n
Present Value Discounted @ 8.65%<\/strong> <\/td>\n$7.78k<\/td>\n$7.78k<\/td>\n$7.44k<\/td>\n$7.50k<\/td>\n$6.44k<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Present Value of 5-year Cash Flow (PVCF)<\/strong>= US$36.93b<\/p>\n

After calculating the present value of future cash flows in the intial 5-year period we need to calculate the Terminal Value, which accounts for all the future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at an annual growth rate equal to the 10-year government bond rate of 2.9%. We discount this to today\u2019s value at a cost of equity of 8.7%.<\/p>\n

Terminal Value (TV)<\/strong> = FCF2022<\/sub> \u00d7 (1 + g) \u00f7 (r \u2013 g) = US$9.75b \u00d7 (1 + 2.9%) \u00f7 (8.7% \u2013 2.9%) = US$175.94b<\/p>\n

Present Value of Terminal Value (PVTV)<\/strong> = TV \/ (1 + r)5<\/sup> = US$175.94b \u00f7 ( 1 + 8.7%)5<\/sup> = US$116.18b<\/p>\n

The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value, which in this case is US$153.11b. The last step is to then divide the equity value by the number of shares outstanding. If the stock is an depositary receipt (represents a specified number of shares in a foreign corporation) then we use the equivalent number. This results in an intrinsic value of $36<\/b>. Compared to the current share price of $45.96, the stock is fair value, maybe slightly overvalued and not available at a discount at this time.<\/p>\n

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