Amid a notable daily gain of 17.65% and a three-month gain of 15.44%, Coca-Cola Consolidated Inc (COKE, Financial) presents an intriguing case for analysis with its Earnings Per Share (EPS) standing at 48.56. The central question we aim to answer is whether the stock is significantly overvalued, as suggested by the current market metrics. This article delves deep into the valuation of Coca-Cola Consolidated, providing a clear perspective on its current market position and intrinsic value as calculated by the GF Value.
Company Overview
Coca-Cola Consolidated Inc operates primarily in the nonalcoholic beverage industry in the United States, focusing on the production, marketing, and distribution of beverage products under a license from Coca-Cola Co. It serves a significant portion of the U.S. market, including states like North Carolina, South Carolina, and several others. A pivotal aspect of this analysis is the comparison between its current stock price of $1009.31 and the GF Value, which estimates the fair intrinsic value at $604.94, suggesting a potential overvaluation.
Understanding GF Value
The GF Value is a proprietary measure calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Coca-Cola Consolidated, the GF Value suggests that the stock is significantly overvalued. This valuation is crucial as it implies that the long-term return on this stock could be less favorable compared to its business growth. The company's market cap stands at $9.50 billion, further emphasizing the scale of its current overvaluation.
Financial Strength and Stability
Investing in a company with robust financial health reduces the risk of loss. Coca-Cola Consolidated's financial strength is evident with a cash-to-debt ratio of 0.86, ranking it better than half of its industry peers. The company's financial strength is rated 8 out of 10 by GuruFocus, indicating a strong financial position.
Profitability and Growth Prospects
Coca-Cola Consolidated has demonstrated consistent profitability with an operating margin of 10.85%, ranking better than 59.09% of its industry peers. The company's 3-year average EBITDA growth rate stands at 25.5%, indicating strong potential for future growth. This growth is crucial for long-term shareholder value creation.
ROIC vs. WACC: A Measure of Value Creation
Comparing the Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides insights into how effectively a company is generating returns relative to its costs. Coca-Cola Consolidated's ROIC of 18.81 significantly surpasses its WACC of 7.52, highlighting its efficiency in creating value for shareholders.
Conclusion
Despite the strong financial and operational metrics, the significant overvaluation of Coca-Cola Consolidated's stock as per GF Value suggests cautious consideration for potential investors. The company's robust financial health and profitability underscore its market position, yet the current stock price exceeds its intrinsic value by a considerable margin.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
