Coca-Cola (KO): fair value

Fair-value band

The normal range for this name runs from $52 (cheap) to $80 (expensive); it is now priced at $93.

Is Coca-Cola undervalued?

Expensive. Coca-Cola trades at $93, 41% above the fair value this model estimates; the normal range for this name runs from $52 (cheap) to $80 (expensive).

Diligence checklist

5 pass · 4 fail · 2 no data

• FAILCash actually collected from profit, last 12 months: 84%XBRL · Coca-Cola only turns 84 cents of every reported dollar of profit into actual cash. I want at least 85. When the gap is this wide the profit is sitting in unpaid invoices and unsold inventory rather than in the bank. It dipped below 70 cents in 1 of the last 3 years. One year is a wobble; two would end the work.
• PASSGap between paper profit and real cash: -1.9%XBRL · Coca-Cola's "profit on paper" and "cash in the bank" gap is small enough to pass.
• PASSDebt compared to one year of cash earnings: 1.54xXBRL · It would take 1.54 years of earnings to clear what Coca-Cola owes, net of the cash it holds. My limit for a name I would buy is three years, so this passes, though the balance sheet is doing more of the work than it does at the top of this list.
• PASSHow much more it earns on capital than that capital costs: +11.29ppXBRL · Coca-Cola earns 11.3 points more on the capital it employs than that capital costs. The gap is real but not wide, so growth here creates value at a modest rate rather than compounding it. The gap is wider than it was at the start of the window.
• FAILStock sold by executives and directors on the open market, last 6 months: $36.2MEDGAR (dealbreaker) · Quincey James sold $15.8M of stock in the last 6 months, outside any pre-planned selling schedule, and $36.2M went out that way in total. My rulebook says more than $5 million of this kind of selling is disqualifying for a "long" position (buying the stock). The full list of open-market sellers: Quincey James $15.8M, Murphy John $13.3M, Quan Nancy $7.1M. A further $115.8M went out under pre-planned 10b5-1 schedules, which I don't count: those sales are set up months ahead and say nothing about what management thinks today. Another $15.8M was sold by holders of 10% or more of the company (Pietracci Bruno $10.1M, Ortega Luisa $4.8M, Ray Sanket $0.9M). They file the same forms but they don't run the business, so they don't count toward this test. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either. filing ↗
• FAILHow long the CEO has run this company: 0.6 yearsTEXT · Coca-Cola's chief executive took the job on March 31, 2026, 0.6 years ago. I want a full cycle at the company, which I take as 5 years, before a management record tells me anything: a short run has not yet been tested by a bad year. filing ↗
• PASSProfit margin held up during the last sales slump: 59.2% vs 61.0% baseXBRL · The last time Coca-Cola's revenue fell, its profit margin per unit sold only slipped a little, from about 61.0% to 59.2%. It means Coca-Cola isn't being forced to cut prices to keep product moving, which is what a company with a weak competitive position has to do. This is the accounts talking, not the filing: I'm reading the 4 quarters from June 2020 to April 2021, measured against the year going into it, and a shift in what the company sold can imitate pricing power either way.
• FAILNormal profit margin across a full business cycle: FCF margin 31.1% vs 24.0% medianXBRL · Coca-Cola is earning a 31.1% cash margin against a long-run average of 24.0%, 30% better than normal. This is what a cycle peak looks like, and paying for peak margins as though they were permanent is the classic way to overpay for a good business. My valuation grows the average instead. Across the window the margin ran between 1.0% in March 2025 and 34.8% in October 2021.
• N/AHow much of the stock trades on an average day: $1,405MMARKET · Coca-Cola trades so much volume that this basically isn't a concern. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• N/AShare of revenue from its single biggest customer: not establishedTEXT · I fetched and read Coca-Cola's February 20, 2026 10-K but found no sentence about customer concentration. That isn't the same as the filing saying there is none: it may simply be worded in a way my search doesn't catch. Read Item 1 and the concentration-of-risk note yourself before trusting this row. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. Coca-Cola hasn't changed auditors in the last 2 years, so there's no such red flag here.