Coca Cola Stock Analysis

Topics: Coca-Cola, Capital asset pricing model, The Coca-Cola Company Pages: 9 (1338 words) Published: May 24, 2014


FIN560 Securities Analysis Course Project: Stock Analysis- The Coca-Cola Company (KO)

Company’s Summary
The Coca-Cola Company manufactures, markets, and sells nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters. The company’s still beverages comprise nonalcoholic beverages without carbonation, including noncarbonated waters, flavored and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees, and sports drinks. It also provides flavoring ingredients, sweeteners, beverage ingredients, and fountain syrups, as well as powders for purified water products. In addition, the company licenses its technologies to suppliers and third parties. The Coca-Cola Company sells its products primarily under the Coca-Cola, Diet Coke, Coca-Cola Light, Coca-Cola Zero, Sprite, Fanta, Minute Maid, Powerade, Aquarius, Dasani, Glacéau Vitaminwater, Georgia, Simply, Minute Maid Pulpy, Del Valle, Ayataka, Bonaqua/Bonaqa, and Schweppes brand names. The company offers its beverage products through a network of company-owned or controlled bottling and distribution operators, as well as through independently bottling partners, distributors, wholesalers, and retailers. Life cycle analysis

Founded in 1886 and headquartered in Atlanta Georgia, The Coca-Cola Company is the world’s largest beverage company.  The Coca-Cola Company incorporated in September 1919 under the laws of the State of Delaware and succeeded to the business of a Georgia corporation with the same name that had been organized in 1892. On October 2, 2010, The Coca-Cola Company acquired the former North America business of Coca-Cola Enterprises Inc. (‘‘CCE’’), one of their major bottlers, consisting of CCE’s production, sales and distribution operations in the United States, Canada, the British Virgin Islands, the United States Virgin Islands and the Cayman Islands, and a substantial majority of CCE’s corporate segment. In 2012, The Coca-Cola Company invested in the beverage business of Aujan Industries Company J.S.C. (‘‘Aujan’’), one of the largest independent beverage companies in the Middle East. As a result of this transaction, they acquired 50 percent of the Aujan entity that holds the rights to Aujan-owned brands, including Rani, a juice brand, and Barbican, a flavored malt beverage brand, in certain territories (Coca-Cola). Financial Analysis

The Holding Period Return (HPR) shows the rate of return over a given investment period. The holding period is calculated by HPR= Ending price – Beginning price + Cash dividend
Beginning price

Below is Coca-Cola’s HPR for 2011 to Current.

Beginning Price
Ending Price
Dividend Paid
HPR
2011
65.88
69.97
0.94
7.64%
2012
70.15
36.25
1.02
-46.87%
2013
36.99
41.31
1.12
14.71%
2014
41.12
40.72
1.22
1.99%

In 2011, The Coca-Cola Company had a holding period return of 7.64%. This means that investors had an increase on stock held in 2011 of 7.64%. In 2012, investors had a loss of 46.87%. This is due to the stock starting off highly priced at $70.15 in January 2012 and ending at $36.25 in December 2012. Investors had a gain of 14.71% on stock held in 2013 and assuming the dividend paid in 2014 is $1.22, investors are looking at a gain of 1.99%. Return on Equity (ROE) is the amount if net income returned as a percentage of shareholders equity. It measures a corporation’s profitability by showing how much profit the company generates with the money shareholders have invested. To calculate ROE:

Return on Equity = Net Income/Shareholder’s Equity

HPR
ROE
2011
7.64%
27.37%
2012
-46.87%
28.00%
2013
14.71%
26.03%
2014
1.99%
26.03%

From 2011-2014, The Coca-Cola Company had high returns on equity. The rise in ROE shows that...

Bibliography: Coca-Cola. (n.d.). 10-K. Retrieved from Coca-Cola: http://assets.coca-colacompany.com/d0/c1/7afc6e6949c8adf1168a3328b2ad/2013-annual-report-on-form-10-k.pdf
Coca-Cola. (n.d.). Investors. Retrieved from Coca-Cola: http://www.coca-colacompany.com/investors/investors-info-reports-and-financial-information
Dividend. (n.d.). Stock Dividend Data. Retrieved April 18, 2014, from Dividend: http://www.dividend.com/dividend-stocks/consumer-goods/beverages-soft-drinks/ko-coca-cola-co/#dividend-growth-history
Investopedia. (n.d.). Capital Asset Pricing Model - CAPM. Retrieved from Investopedia: http://www.investopedia.com/terms/c/capm.asp
Investopedia. (2104, April 18). Dividend Discount Model - DDM. Retrieved from Investopedia: http://www.investopedia.com/terms/d/ddm.asp
Investopedia. (n.d.). Retun on Equity. Retrieved April 14, 2014, from Definition of Return on Equity: http://www.investopedia.com/terms/r/returnonequity.asp
Moriningstar. (n.d.). Coca Cola. Retrieved April 8, 2014, from Financials: http://financials.morningstar.com/ratios/r.html?t=KO®ion=usa&culture=en-US&ownerCountry=USA
Yahoo. (n.d.). Yahoo Finance. Retrieved April 18, 2014, from Historical Prices: http://finance.yahoo.com/q/hp?s=KO&a=00&b=2&c=2011&d=03&e=20&f=2014&g=m
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