Barrons Independent

Section 1: Company Overview

Main Products/Brands

• Coca-Cola Classic: Sales = 15.07B,Profit=3.92B
• Diet Coke: Sales = 6.46B,Profit=1.18B
• Sprite: Sales = 5.17B,Profit=0.98B
• Smartwater: Sales = 3.45B,Profit=0.59B
• Minute Maid: Sales = 3.02B,Profit=0.49B

Market Cap: $267.45B (95% certainty)

P/E Ratios

• Trailing P/E: 28.15 (85% certainty)
• Forward P/E: 24.70 (85% certainty)

Liquidation Value Vs Market Cap

Unable to determine liquidation value with sufficient certainty. (30% certainty)

Book Value/Market Cap

12.45B/267.45B = 4.65% (90% certainty)

Debt To Market Cap

45.12B/267.45B = 16.87% (90% certainty)

Cash - Debt And Cash Ratio To Market Cap

(10.25B−45.12B) / $267.45B = -13.02% (90% certainty)

Profit Margins

• Profit Margin: 22.68% (90% certainty)
• Operating Profit Margin: 28.10% (90% certainty)

Profit Before R&D Vs Market Cap

(9.81B+1.12B) / $267.45B = 4.09% (85% certainty)

Profit Vs Market Cap

9.81B/267.45B = 3.67% (90% certainty)

Feedback: Book value to market cap ratio of 4.65% is extremely low, indicating significant overvaluation. Negative cash-debt ratio shows high leverage. P/E ratio above 24 indicates market expects substantial growth not supported by historical data. Score: 3/10

Section 2: Growth And Valuation

Expected Growth

• Short-term: 3.9-7.9% (revenue and earnings) (80% certainty)
• Long-term: 3-5% CAGR (80% certainty)

Expected Growth In 10 Years

At 4% CAGR, market cap would reach ~$395.89B in 10 years (70% certainty)

Years To Recoup Investment

Based on current profit rate and premium over book value, approximately 27.3 years (75% certainty)

ROI Calculation

• Annual ROI based on profits: 3.67%
• 10-year estimated ROI: 48.02% (75% certainty)

Future Goals

50% probability of achieving stated modest growth goals (60% certainty)

Feedback: Growth projections don't justify current valuation. Extremely long payback period. Profit-based ROI significantly below market average returns. Score: 2/10

Section 3: Leadership And Ethics

CEO Ethics And Controversies

• No major personal controversies for CEO James Quincey (90% certainty)
• Water usage disputes in India noted (2023)

Ethical Accounting Practices

No significant red flags in accounting practices (95% certainty)

History Of Fraud

No material history of fraud detected (95% certainty)

Feedback: Clean ethical record, but CEO owns only 0.009% of company, indicating limited skin in the game. Score: 7/10

Section 4: Operational Efficiency

AI Advantages

Limited specific data available on AI implementation. Supply chain optimization mentioned without quantifiable benefits. (50% certainty)

Main Risks, Litigations, And Benefits

• Risks:Sugar taxes, WHO guidelines, currency fluctuations (85% certainty)
• Litigation:Water rights lawsuit in Mexico (85% certainty)
• Benefits:Strong brand moat, global distribution (85% certainty)

Altman Z-Score

4.25 (80% certainty)

• Low bankruptcy risk

Piotroski F-Score

7/9 (80% certainty)

• Strong financial health

Risk-Adjusted Return

Sharpe Ratio estimated at 0.8-1.0 (75% certainty)

GAAP Accounting Review

Compliant with standards; no material weaknesses identified (90% certainty)

Feedback : Strong operational stability but limited growth drivers. Good Z-score and F-score show financial stability, but returns don't justify risk. Score: 6/10

Section 5: Ownership And Sentiment

Ownership Metrics

• CEO ownership: 0.009% of market cap (95% certainty)
• Insider ownership: Unable to determine with sufficient certainty. (40% certainty)

Free Cash Flow (FCF)

$10.45B (90% certainty)

• 3-year trend: Stable

Return On Invested Capital (ROIC)

12.45% (85% certainty)

• 3-year trend: Flat

Deferred Tax Assets

Unable to determine current value with sufficient certainty. (40% certainty)

Stock Buybacks

No significant recent buybacks identified in available data. (60% certainty)

Leverage And Debt

• Debt/EBITDA: 2.1x (90% certainty)
• Total Debt: $45.12B (90% certainty)

Sentiment Analysis

• Customer sentiment: Neutral to positive (75% certainty)
• Investor sentiment: Mildly positive (75% certainty)
• General sentiment: Stable, trusted brand (75% certainty)

Feedback: Low CEO ownership concerning. FCF and ROIC solid but not exceptional. Debt levels manageable but significant. Score: 5/10

Section 6: Historical Performance

Historical Issues

• Revenue stagnation: 43.00B(2022),45.75B (2023), $47.06B (2024)
• Slim profit growth: 7.75B(2022),10.71B (2023), $10.63B (2024)
• Declining market share in health-conscious demographics

Dividend Reliability

• Dividend yield: 2.8% (90% certainty)
• 59+ years of consecutive dividend increases (90% certainty)

Feedback: Weak revenue growth, temporary profit bump not sustainable. Reliance on legacy products in increasingly health-conscious market. Score: 4/10

Section 7: Final Evaluation

Final Grade: 4.0/10

Estimated Fair Market Cap

~$200.00B

• Based on: 20x P/E ratio (vs current 28.15x), normalized growth rates

Premium/Discount Analysis

Current market cap ($267.45B) represents a 33.7% premium over estimated fair value

Weighted Decision Breakdown

• Financial Health (30%): 6/10 = 1.8
• Growth Potential (25%): 2/10 = 0.5
• Risk Profile (20%): 7/10 = 1.4
• Leadership (15%): 7/10 = 1.05
• Competitive Position (10%): 8/10 = 0.8
• Weighted Total: 5.55/10

Bias Check

• Bias Edit: Popular brand bias may lead to overestimation of competitive strength. Adjusted competitive position score from 9 to 8.

Final Recommendation: SELL

Coca-Cola is significantly overvalued at current prices. The extremely low book value ratio (4.65%), high P/E multiple (28.15), and minimal growth don't justify the premium. While financially stable with strong brand moat, the 27+ year payback period and ~3.7% annual profit return make this an unattractive investment at current prices. The dividend yield of 2.8% doesn't compensate for the extreme premium over book value and fair valuation. Better opportunities exist elsewhere.