The Coca-Cola CompanyKONYSE

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DCF Valuation

DCF Valuation Summary

Buy

Fair Value: $99.97 per share(market-calibrated)

+26.0%

Upside to Fair Value

Current

$79.34

Pure Model

$106.30

Fair Value

$99.97

Bull Case

$128.77

Bear Case

$86.31

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.62%

Calibrated Growth

2.03%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $106.30.

What's Driving This Ratingfor KO

↓

CapEx normalizing toward maintenance

Historical CapEx is 3.70% of revenue (heavy investment phase). Model fades this to 3.00% by Year 10, freeing up ~$478M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 38.30% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 2.22% revenue growth, fading to 2.50% by Year 10. Revenue reaches $67.9B (vs $47.9B today).

🎯

Market pricing in lower growth than model

The market implies only 0.62% perpetual growth — 188bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.63% indicates efficient cash generation. FCF reaches $20.9B by Year 10 (30.85% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.33

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)5.99%

Cost of Debt

Pre-tax Cost of Debt3.22%

Tax Rate17.88%

After-tax Cost of Debt2.64%

Equity Weight (E/V)88.24%

Debt Weight (D/V)11.76%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (88.24% × 5.99%) + (11.76% × 2.64%)

= 5.60%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$49.0B	$52.5B	$57.4B	$62.2B	$67.9B
EBIT	$18.8B	$20.1B	$22.0B	$23.8B	$26.0B
Tax	$3.4B	$3.6B	$3.9B	$4.3B	$4.7B
NOPAT	$15.4B	$16.5B	$18.1B	$19.6B	$21.4B
+ Depreciation	$1.2B	$1.3B	$1.4B	$1.5B	$1.7B
- Capex	$1.8B	$1.9B	$1.9B	$2.0B	$2.0B
- Δ NWC	$40M	$101M	$98M	$86M	$62M
Free Cash Flow	$14.8B	$15.9B	$17.4B	$19.0B	$20.9B
Discount Factor	0.947	0.849	0.762	0.683	0.580
Present Value	$14.0B	$13.5B	$13.3B	$13.0B	$12.1B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$20.9B

Terminal Growth Rate2.50%

WACC5.60%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$692.7B

PV of Terminal Value$401.7B

Exit Multiple Method

Year 10 EBITDA$27.7B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$554.0B

PV of Terminal Value$321.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$131.1B

PV of Terminal Value$401.7B

Enterprise Value$532.9B

(-) Net Debt$35.2B

Equity Value$497.6B

Shares Outstanding4.3B

Price per Share$115.65

Exit Multiple Method

PV of Projected FCFs$131.1B

PV of Terminal Value$321.3B

Enterprise Value$452.4B

(-) Net Debt$35.2B

Equity Value$417.2B

Shares Outstanding4.3B

Price per Share$96.95

Pure Model Fair Value

$106.30

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
3.60%	$153.46	$152.29	$145.86	$139.73	$133.88
4.60%	$115.80	$125.88	$140.75	$139.73	$133.88
5.60%	$94.57	$99.62	$106.30	$115.55	$129.20
6.60%	$80.33	$83.25	$86.88	$91.52	$97.66
7.60%	$69.82	$71.66	$73.86	$76.55	$79.89

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$86.31

8.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.42

Base Case

$106.30

34.0% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.33

Bull Case

$128.77

62.3% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.30

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Defensive Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.22%

Year 3 Revenue Growth5.43%

Year 5 Revenue Growth4.80%

Year 7 Revenue Growth3.88%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin38.30%

Tax Rate17.88%

Historical Capex / Rev3.70%

Terminal Capex / Rev3.00%

NWC / Revenue3.72%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Defensive sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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