Valuing Coca-Cola Using Discounted Cash Flow Analysis

Abstract

Coca-Cola experienced a constant revenue decline from 2013 to 2018 due to the structural change of the company, and then COVID-19 impacted the world economy. However, in such an era filled with uncertainties, the market cap of Coca-Cola has barely fallen yet had a constant increase yearly. Thus, this paper uses DCF analysis to investigate the ‘intrinsic’ value of Coca-Cola and hence evaluate the rationality of the current market value of Coca-Cola. The future free cash flow is forecasted based on the historical free cash flows of Coca-Cola, and reasonable assumptions are made to discount the sum of the future free cash flow and give an answer of valuation. By conducting the analysis, the rationality of the current market value of Coca-Cola is justified, and it is realized that there is further potential for Coca-Cola to grow in the future by considering a wider range of financial metrics. It is suggested that Coca-Cola’s stock is a good choice for long-term investment.