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The Coca-Cola Company Message Board

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  • rodtrw rodtrw Dec 18, 1999 3:13 PM Flag

    question for longs re: Warren Buffett

    ben and mike, I agree that the price of this
    stock and others are too high. There is a lot of money
    being invested in 401k's IRA'S etc and KO is thought of
    as being a long term growth co with a lot of
    international growth BUT IT IS NOT GROWING BY 50 TIMES EARNINGS
    and as soon as the momentum of the market slows this
    stock and others will come down. Alan Greenspam may
    help the process this Tuesday by increasing stock
    margins or a tighing bias!

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    • Depressed earnings. It is not accurate to say
      that the PE is 50. It is true that the current PE
      based on the current depressed earnings is 50. It
      should be noted that had the earnings stayed the course
      since 1997, the PE would have been less than
      30.

      Besides PE alone does not suffice in assessing the value
      of a stock. Even PE relative to the growth rate is
      not enough. It is a good indicater but not enough.
      How would you rate a stock if for some unforseen and
      temporary reason it loses all of its profits for the year?
      Its PE would be infinity and its PEG will also be
      infinity. Does that mean that company is overvalued at any
      price?

      KO has a long --- very long --- record of
      outstanding accomplishments. That is got to worth something.
      Its products have been tested and well accepted by
      many generations of people. That is got to worth
      something. Its brand name has become a huge icon of American
      business know how across the globe. That is got to worth
      something.

      Does KO have problems. I think they do. I am glad to
      see that they finally pushed out Ivester and replaced
      him with a new CEO. There was absolutely no excuse
      for Ivester to come up short of standards for 5 or 6
      quarters. There was also no excuse for him not to go to
      Belgium for 6 days after the health problems associated
      with KO.

      Can KO go to $25, everything is
      possible in the stock market, but I do not think it is
      very likely. I believe that we have seen the lows for
      KO at $47 5/16. I think that the earnings for 4th
      quarter and next year will be fine and will meet or
      exceed expectations; the new CEO knows that he has to
      perform or lose his job.

      ---- Mike

      • 2 Replies to mmiken99
      • I totally agree, that if an aberration of poor
        earnings happen it should not necessarily affect the p/e .
        What do you project earnings on Coke going out 5
        years. I project 1.91 in 2003. That is an 8 % growth
        rate after 1.52 in year 2000. If those numbers are not
        attained, the stock will have continued trouble. Look
        what's happening to the company. Slow volume growth,
        increased prices which will affect margins, higher fuel
        costs, higher interest costs, a worldwide expansion that
        at some point might slow down. Under normal business
        conditions I dont see greater than 8 % growth.

        price
        to sales in 1989 was 3, today it is 8. Price to book
        was around 9 , now it is 16.5, price to cash flow was
        20 now it is 41 times. Granted the net profit margin
        is up from 13 % to 16 %. You also have a low dollar
        which is helpful.

        I would love to hear what
        Warren says about this one. If there was no such thing
        as a tax system, I suspect he would have sold this
        one.

        Someone, please argue with my numbers.
        I'm not looking for a fight, I just want to know if
        my analysis is right or wrong. One last thing, I
        think Wall Street Analysts claim they love this stock,
        because if they said otherwise, Coke management would cut
        them off of the investment banking operations (debt
        issues, etc).

      • Nice post.

 
KO
41.61-0.03(-0.07%)Sep 17 4:00 PMEDT

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