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The Coca-Cola Company Message Board

  • Novalis_97 Novalis_97 Dec 17, 1997 9:03 PM Flag

    Coca-Cola Is Undervalued by about 19%

    How to value a company:

    Intrinsic Value = owner earnings / (discount rate + owner earnings' growth rate)

    Owner earnings = net income + depreciation - capital expenditures

    Discount rate = 30-yr bond rate (correct upward if cyclically low)

    Assume owner earnings' growth rate = 0.05, which is very conservative, considering it is actually 0.35 this year vs. 1996.

    So intrinsic value of Coke = ($4,416 mil. + $600 mil. - $1,035) / [(0.05985 + 0.01 correction) - 0.05]

    = $200,554.20 mil. (at least)

    Current market capitalization = $162,923.70 mil.

    Margin of Safety = ($200,554.20 mil. - $162,923.70 mil.) / $200,554.20 mil.

    = 18.8% (at least)

    In other words, Coke's current share price of $65.875 is selling at a 18.8% discount of what it should really be selling at, $81.09 [$65.875 / (1 - 0.1876) = $81.09]

    When the margin of safety was 26.6% at the end of 1995/beginning of 1996, Coke was selling at $37.13 when it should really have been selling at $50.58. Warren Buffett bought 100,000 shares of Coke at the beginning of 1996, doubling his ownership from 100,000 to 200,000 shares. I'm sure if you look at the 1997 Berkshire Hathaway annual report when it comes ou, you will see he has bought even more in 1997. When Coke was in the mid-50s earlier this year, the margin of safety was at least 32%.

    Expect Coke to hit at least $81 by the end of 1998, and most likely somewhere between 80 and 90.



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    • Thank you Harvey. Your response confirms my thoughts as I had stated.
      (Since "any intelligent person defines the structure"..., please so state the "structure" to which you refer.
      Personally..., I don't think you can.., or if you create something, it will be without merit or logic. Obviously, I may be incorrect, but your past endeavors substantiate my thoughts.)

      Again..., your response to my comment:
      "Michael, you are a babbling fool. You ask for information and at the same time say it is worthless. You have stopped learning, and no longer have the basis to grow, due to your brain inhibiting the function of the heart. It is a sign that your future is just to grow old."

      NOTE: Harvey, please recall that I have stated on more than one occasion that you don't appear to understand that which you attempt to read, e.g., "Obviously, I may be incorrect, but your past endeavors substantiate my thoughts.
      Unfortunately, you proved me to be correctomente!

      OBSERVATION: I assume that you were being introspective in developing your "You have stopped learning, and no longer have the basis to grow, due to your brain inhibiting the function of the heart. It is a sign that your future is just to grow old."

      LAST: $46.64

    • Michael, you are a babbling fool. You ask for information and at the same time say it is worthless. You have stopped learning, and no longer have the basis to grow, due to your brain inhibiting the function of the heart. It is a sign that your future is just to grow old.

    • Harvey..., let us cut to the chase!

      REGARDING: The structure is creative and permits additional creativity. Any creative person starts with structure. Any intelligent person defines the structure to permit what one wants to build. Michael, you talk like a grade schooler...

      RESPONSE: Since "any intelligent person defines the structure"..., please so state the "structure" to which you refer.
      Personally..., I don't think you can.., or if you create something, it will be without merit or logic. Obviously, I may be incorrect, but your past endeavors substantiate my thoughts.

      LAST: $46.60

    • I heard that, moron.

    • Michael, in response:

      >>>REGARDING: M_va1demar, the financial structure remains the same. Therefore, the day to day, year to year accounting can be no different.
      RESPONSE: Harvey�, perhaps part of your problem is that you don�t appear to understand what you are attempting to read. The poster is referring to �creative accounting� which differs from �accounting structure�.<<<

      The structure is creative and permits additional creativity. Any creative person starts with structure. Any intelligent person defines the structure to permit what one wants to build. Michael, you talk like a grade schooler...

      >>>REGARDING: The same auditor still audits both KO and CCE.
      RESPONSE: You are close enough. Whereas E&Y audits both companies, different partners are in charge�., with each having little integrity. When I was involved in the research of the �cooler� matter, the partner-in-charge of TCCC would suggest I ask the partner-in-charge of CCE, and visa-versa�., i.e., a game of �pass-the-buck�.<<<

      I was very clear with my statement. Please don't abscond with it. Yes, I agree with what you wrote, it is just a more freshman like explanation. Let's get to grad school!

      >>>REGARDING: Why should anything be viewed differently today?
      RESPONSE: Because today is different than yesterday? <<<

      Show me how. Don't just blabber something.

    • Michael, the past couple of years of writeoffs has nothing to do with 'coolers'. In fact, coolers have never been an accounting problem with KO. You have mixed up your companies. Stop weaseling about. When a company is a year in and year out writeoff artist, you must review their writeoffs for their effect on current accounting. You didn't do so and profess you don't need to do so. I and others laugh at you. You made a major error in analysis and judgement, and you just dig a deeper hole every time you post on this subject. Sort of like Clinton, where the little lies just kept piling up. Stop worrying about what 'IS' is, or what 'sex' is. Start doing your homework and less brainless pontificating.

    • Dear Clifford..

      Huh? You being the number one cheerleader for these clowns at TCCC in no way contribute positively to the board conversation... You bring no objectivity nor state concrete evidence to your positions. I for one find most individuals posting on this board (with the exception of analchord and his various sick handles) somewhat thought provoking whether you agree with their position or not....

      You need to go back to your cubicle at North Avenue and hide like the rest of the employees are doing...

    • What makes you think anyone cares about your braggings? If your intention was to fill this board with trash you have been very successful.

    • REGARDING: Any insightful analysis of a company that is a serial writeoff artist would know that the keyword 'today' requires you to consider the past couple of years.

      RESPONSE: Harvey...., when I think I really understand you...., you seem to still startle me!
      The past couple years INCLUDED the fiasco regarding the "cooler" scheme. TODAY it is not included!
      Please advise all as to your problem.

      You don't masquerade at all..., you let it all hang out. All the strangeness!

    • Michael, regarding your comment:

      >>>RESPONSE: Harvey..., the KEY word is "today". <<<

      Any insightful analysis of a company that is a serial writeoff artist would know that the keyword 'today' requires you to consider the past couple of years. That you prefer to copout with the pompous junk of 'keyword' security blankets is sad. You made a mistake. Another of your pontifications, a shot from the hip, was challenged. And you respond with intellectual nonsense. Thankfully, Homer Simpson keeps us amused with comments like yours.

    • View More Messages
 
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