The stock of Coca-Cola Consolidated (NAS:COKE, 30-year Financials) shows every sign of being modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $342.61 per share and the market cap of $3.2 billion, Coca-Cola Consolidated stock shows every sign of being modestly overvalued. GF Value for Coca-Cola Consolidated is shown in the chart below.
Because Coca-Cola Consolidated is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 12.8% over the past five years.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Coca-Cola Consolidated has a cash-to-debt ratio of 0.05, which is in the bottom 10% of the companies in the industry of Beverages - Non-Alcoholic. The overall financial strength of Coca-Cola Consolidated is 5 out of 10, which indicates that the financial strength of Coca-Cola Consolidated is fair. This is the debt and cash of Coca-Cola Consolidated over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Coca-Cola Consolidated has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $5.1 billion and earnings of $22.42 a share. Its operating margin is 7.34%, which ranks in the middle range of the companies in the industry of Beverages - Non-Alcoholic. Overall, GuruFocus ranks the profitability of Coca-Cola Consolidated at 7 out of 10, which indicates fair profitability. This is the revenue and net income of Coca-Cola Consolidated over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Coca-Cola Consolidated is 12.8%, which ranks better than 80% of the companies in the industry of Beverages - Non-Alcoholic. The 3-year average EBITDA growth rate is 27.1%, which ranks better than 87% of the companies in the industry of Beverages - Non-Alcoholic.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Coca-Cola Consolidated's ROIC is 10.60 while its WACC came in at 6.73. The historical ROIC vs WACC comparison of Coca-Cola Consolidated is shown below:
Overall, Coca-Cola Consolidated (NAS:COKE, 30-year Financials) stock is estimated to be modestly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 87% of the companies in the industry of Beverages - Non-Alcoholic. To learn more about Coca-Cola Consolidated stock, you can check out its 30-year Financials here.
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