Coca-Cola (KO) Valuation and Stock Analysis
This stock valuation and analysis article is a continuation of our previous positing: Is Coca-Cola Stock a Good Investment? Check out the previous piece as it presents a fundamental analysis of Coca-Cola
- Coca-Cola – Comparative Valuation Analysis
With a current Market Cap (MC) of $178.11B, Coca-Coal (KO) is easily the largest compared to its two main rivals: PepsiCo (PEP), with a MC of $124.90B and Dr Pepper Snapple (DPS), with a MC of $9.38B.
Trailing 12-Month P/E (TTM P/E): Both KO and PEP are fairly evenly valued on this metric, with TTM P/E's of 20.93x and 20.69x respectively. However, DPS is trading at a comparatively discounted TTM P/E of only 15.33x. The Industry average for this valuation is 23.0x, which means while DPS is trading at a significant discount to the Industry average, both KO and PEP are valued fairly close to their Industry peers.
Forward P/E (F P/E): On a F P/E basis, the three companies are valued within a fairly narrow range of each other, with DPS (13.81x) the most discounted, and PEP (16.90x) and KO (17.09x) in 2nd and 3rd place respectively. The S&P 500 average for this metric is 14.6x, which means PEP and KO are valued at a slight premium to their S&P 500 peers.
TTM Price/Sales (TTM P/S): With a valuation of 3.79x, KO is trading at a comparative premium to both PEP (1.91x) and DPS (1.59x). The Industry average of 2.4x for this metric also means that KO is trading at a premium to its other Industry peers.
- Technical Perspective
As is apparent from the stock movement chart below, Coca-Cola stock saw a sharp decline during the month of August 2012, at which point the company had executed a 2:1 stock split (on Aug 13). During August 2012, the stock lost 8% of its value (down to $37.40 on Aug 31 from $40.51 on Aug 1). From then, up to mid Feb 2013, the stock has seen a fair bit of volatility while trading in a semi-base-building pattern.
Having established a fairly eratic base, the stock started an upward movement in the second half of Feb 2013, which saw it break resistance at its 50-day, 100-day and 200-day Simple Moving Averages (SMAs), peaking at $43.09 on May 16.
Since then however, KO has dropped precipitously, closing lower in 8 of the last 10 trading sessions (as of May 31). The last 3 trading sessions have seen the stock lose more than 6% o its value in a free-fall, dropping through support at its 100-day SMA ($37.44), and heading downward towards its 50-day SMA ($37.20).
Technical-minded investors would do well to watch and see if the stock finds support at the 50-day SMA. If not, the next technical milestone will likely be at the 200-day SMA ($37.85), beyond which the stock could very well see levels that it saw back in late Dec 2013-early Jan 2013 (in the $35 range).
- Bottom Line Conclusion
Based on the categorical results from our above analysis, MarketConsensus rates Coca-Cola stock, KO, as a MODERATE BUY.
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