• Investors may be wondering if Coca-Cola Consolidated is still priced attractively after its strong multiyear run, or if most of the value is already on the table.
• The stock last closed at US$192.67, with returns of 3.5% over 7 days, 3.9% over 30 days, 28.6% year to date and 39.8% over the last year, while the 3-year and 5-year returns are very large.
• Recent attention on Coca-Cola Consolidated has focused on its share price performance and how it fits into broader themes in beverages and consumer staples. For investors, this context raises the question of whether current expectations are already built into the price or if there is still room for a favorable entry point.
• The company currently has a valuation score of 3 out of 6, and the next sections will walk through standard valuation approaches before finishing with a way to tie those methods together into a clearer picture of value.

Approach 1: Coca-Cola Consolidated Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash Coca-Cola Consolidated is expected to generate in the future and then discounts those cash flows back into today’s dollars to estimate what the business might be worth right now.

Coca-Cola Consolidated’s last twelve months Free Cash Flow is about $596.0 million. Using a 2 Stage Free Cash Flow to Equity model, cash flows are projected through to 2035, with Simply Wall St extrapolating beyond the typical 5 year analyst window. By 2035, the model uses an estimated Free Cash Flow of $890.4 million, with each year between now and then discounted back to a present value in dollars.

Adding these discounted cash flows together, plus an estimate of value beyond the explicit forecast period, results in an intrinsic value of about $276.07 per share. Compared with the recent share price of $192.67, the model suggests Coca-Cola Consolidated trades at a 30.2% discount. This points to the shares looking undervalued on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Coca-Cola Consolidated is undervalued by 30.2%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

Approach 2: Coca-Cola Consolidated Price vs Earnings

For a profitable company like Coca-Cola Consolidated, the P/E ratio is a useful way to think about what investors are paying for each dollar of current earnings. It ties the share price directly to the company’s earnings power, which is usually the main driver of long term returns.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth and lower perceived risk can support a higher P/E, while slower growth or higher uncertainty usually lines up with a lower multiple.

Coca-Cola Consolidated currently trades on a P/E of 22.48x. That sits above the Beverage industry average P/E of 17.74x, while the peer group average is 65.53x, which looks much higher in comparison. Simply Wall St also uses a proprietary “Fair Ratio,” which is the P/E you might expect for this company given factors like its earnings growth profile, profit margins, industry, market value and company specific risks.

This Fair Ratio is more tailored than a simple industry or peer comparison, because it adjusts for what actually makes Coca-Cola Consolidated different. The Fair Ratio for Coca-Cola Consolidated is not provided here, so its relationship to the current 22.48x P/E cannot be assessed.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Coca-Cola Consolidated Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced here as simple stories you create about Coca-Cola Consolidated that connect your view on its products, moat, industry tailwinds and risks to concrete numbers like future revenue, earnings, margins and a fair value estimate. All of this happens within the Narratives tool on Simply Wall St’s Community page, where you can see how different investors might, for example, build a more cautious story around a lower fair value than US$1,566.98 or a more optimistic story around a higher fair value. You can then compare each Narrative’s Fair Value to the current share price to help decide if the stock appears expensive or cheap at the moment, with those Narratives automatically refreshing as new news, earnings or other data arrive.

Do you think there's more to the story for Coca-Cola Consolidated? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.