Stock Analysis on Net

Coca-Cola Co. (NYSE:KO)

Economic Value Added (EVA)

Microsoft Excel LibreOffice Calc

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.


Economic Profit

Coca-Cola Co., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net operating profit after taxes (NOPAT)1 8,649  8,843  6,569  37  5,729 
Cost of capital2 6.63% 6.84% 6.66% 6.40% 6.37%
Invested capital3 75,674  73,753  68,688  72,804  79,320 
 
Economic profit4 3,635  3,801  1,994  (4,626) 678 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 8,6496.63% × 75,674 = 3,635

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Coca-Cola Co. economic profit increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

Net Operating Profit after Taxes (NOPAT)

Coca-Cola Co., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net income attributable to shareowners of The Coca-Cola Company 7,747  8,920  6,434  1,248  6,527 
Deferred income tax expense (benefit)1 (18) (280) (450) (1,256) (856)
Increase (decrease) in allowances2 23  12  11  114 
Increase (decrease) in accrued expenses related to restructuring3 136  (24) (116) 55  (53)
Increase (decrease) in equity equivalents4 120  (281) (554) (1,190) (795)
Interest expense 1,437  946  919  841  733 
Interest expense, operating lease liability5 49  42  10 
Adjusted interest expense 1,486  988  929  850  742 
Tax benefit of interest expense6 (312) (207) (195) (297) (260)
Adjusted interest expense, after taxes7 1,174  780  734  552  483 
(Gain) loss on marketable securities (153) (249) 255  (103) (140)
Interest income (370) (563) (682) (677) (642)
Investment income, before taxes (523) (812) (427) (780) (782)
Tax expense (benefit) of investment income8 110  171  90  273  274 
Investment income, after taxes9 (413) (641) (337) (507) (508)
(Income) loss from discontinued operations, net of tax10 —  —  251  (101) — 
Net income (loss) attributable to noncontrolling interest 21  65  42  35  23 
Net operating profit after taxes (NOPAT) 8,649  8,843  6,569  37  5,729 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances.

3 Addition of increase (decrease) in accrued expenses related to restructuring.

4 Addition of increase (decrease) in equity equivalents to net income attributable to shareowners of The Coca-Cola Company.

5 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,622 × 3.00% = 49

6 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,486 × 21.00% = 312

7 Addition of after taxes interest expense to net income attributable to shareowners of The Coca-Cola Company.

8 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 523 × 21.00% = 110

9 Elimination of after taxes investment income.

10 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Coca-Cola Co. NOPAT increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

Cash Operating Taxes

Coca-Cola Co., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Income taxes from continuing operations 1,981  1,801  1,623  5,560  1,586 
Less: Deferred income tax expense (benefit) (18) (280) (450) (1,256) (856)
Add: Tax savings from interest expense 312  207  195  297  260 
Less: Tax imposed on investment income 110  171  90  273  274 
Cash operating taxes 2,201  2,118  2,178  6,840  2,428 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Coca-Cola Co. cash operating taxes decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.

Invested Capital

Coca-Cola Co., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Loans and notes payable 2,183  10,994  13,194  13,205  12,498 
Current maturities of long-term debt 485  4,253  4,997  3,298  3,527 
Long-term debt, excluding current maturities 40,125  27,516  25,364  31,182  29,684 
Operating lease liability1 1,622  1,392  467  510  645 
Total reported debt & leases 44,415  44,155  44,022  48,195  46,354 
Equity attributable to shareowners of The Coca-Cola Company 19,299  18,981  16,981  17,072  23,062 
Net deferred tax (assets) liabilities2 (627) (128) (734) 2,191  4,039 
Allowances3 526  524  489  477  466 
Accrued expenses related to restructuring4 202  66  90  206  151 
Equity equivalents5 101  462  (155) 2,874  4,656 
Accumulated other comprehensive (income) loss, net of tax6 14,601  13,544  12,814  10,305  11,205 
Equity attributable to noncontrolling interests 1,985  2,117  2,077  1,905  158 
Adjusted equity attributable to shareowners of The Coca-Cola Company 35,986  35,104  31,717  32,156  39,081 
Marketable securities7 (4,727) (5,506) (7,051) (7,547) (6,115)
Invested capital 75,674  73,753  68,688  72,804  79,320 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of accrued expenses related to restructuring.

5 Addition of equity equivalents to equity attributable to shareowners of The Coca-Cola Company.

6 Removal of accumulated other comprehensive income.

7 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Coca-Cola Co. invested capital increased from 2018 to 2019 and from 2019 to 2020.

Cost of Capital

Coca-Cola Co., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 216,198  216,198  ÷ 263,221  = 0.82 0.82 × 7.79% = 6.39%
Debt3 45,401  45,401  ÷ 263,221  = 0.17 0.17 × 1.59% × (1 – 21.00%) = 0.22%
Operating lease liability4 1,622  1,622  ÷ 263,221  = 0.01 0.01 × 3.00% × (1 – 21.00%) = 0.01%
Total: 263,221  1.00 6.63%

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 251,625  251,625  ÷ 296,736  = 0.85 0.85 × 7.79% = 6.60%
Debt3 43,719  43,719  ÷ 296,736  = 0.15 0.15 × 1.92% × (1 – 21.00%) = 0.22%
Operating lease liability4 1,392  1,392  ÷ 296,736  = 0.00 0.00 × 3.00% × (1 – 21.00%) = 0.01%
Total: 296,736  1.00 6.84%

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 196,067  196,067  ÷ 240,166  = 0.82 0.82 × 7.79% = 6.36%
Debt3 43,632  43,632  ÷ 240,166  = 0.18 0.18 × 2.11% × (1 – 21.00%) = 0.30%
Operating lease liability4 467  467  ÷ 240,166  = 0.00 0.00 × 2.11% × (1 – 21.00%) = 0.00%
Total: 240,166  1.00 6.66%

Based on: 10-K (reporting date: 2018-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 187,871  187,871  ÷ 236,754  = 0.79 0.79 × 7.79% = 6.18%
Debt3 48,374  48,374  ÷ 236,754  = 0.20 0.20 × 1.69% × (1 – 35.00%) = 0.22%
Operating lease liability4 510  510  ÷ 236,754  = 0.00 0.00 × 1.69% × (1 – 35.00%) = 0.00%
Total: 236,754  1.00 6.40%

Based on: 10-K (reporting date: 2017-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 179,381  179,381  ÷ 226,276  = 0.79 0.79 × 7.79% = 6.17%
Debt3 46,250  46,250  ÷ 226,276  = 0.20 0.20 × 1.46% × (1 – 35.00%) = 0.19%
Operating lease liability4 645  645  ÷ 226,276  = 0.00 0.00 × 1.46% × (1 – 35.00%) = 0.00%
Total: 226,276  1.00 6.37%

Based on: 10-K (reporting date: 2016-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Coca-Cola Co., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Economic profit1 3,635  3,801  1,994  (4,626) 678 
Invested capital2 75,674  73,753  68,688  72,804  79,320 
Performance Ratio
Economic spread ratio3 4.80% 5.15% 2.90% -6.35% 0.85%
Benchmarks
Economic Spread Ratio, Competitors4
Altria Group Inc. 6.11% -7.77% 8.73% 13.15% 40.33%
Mondelēz International Inc. -0.27% -0.66% 0.06% -2.92% -3.32%
PepsiCo Inc. 5.59% 7.49% 8.96% 1.65% 5.89%
Philip Morris International Inc. 19.85% 18.32% 20.04% 11.62% 19.43%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 3,635 ÷ 75,674 = 4.80%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Coca-Cola Co. economic spread ratio improved from 2018 to 2019 but then slightly deteriorated from 2019 to 2020.

Economic Profit Margin

Coca-Cola Co., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Economic profit1 3,635  3,801  1,994  (4,626) 678 
Net operating revenues 33,014  37,266  31,856  35,410  41,863 
Performance Ratio
Economic profit margin2 11.01% 10.20% 6.26% -13.06% 1.62%
Benchmarks
Economic Profit Margin, Competitors3
Altria Group Inc. 9.74% -13.26% 16.80% 19.01% 59.03%
Mondelēz International Inc. -0.62% -1.51% 0.13% -6.47% -7.47%
PepsiCo Inc. 5.56% 6.63% 8.37% 1.49% 5.57%
Philip Morris International Inc. 8.34% 7.35% 7.76% 4.80% 7.40%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 Economic profit. See details »

2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Net operating revenues
= 100 × 3,635 ÷ 33,014 = 11.01%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Coca-Cola Co. economic profit margin improved from 2018 to 2019 and from 2019 to 2020.