Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Coca-Cola Co. (NYSE:KO)

Economic Value Added (EVA)

Advanced level

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, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 9,018  6,482  (18) 5,782  7,572 
Cost of capital2 5.06% 4.95% 4.75% 4.71% 4.77%
Invested capital3 73,687  68,598  72,598  79,169  77,538 
 
Economic profit4 5,287  3,083  (3,463) 2,053  3,870 

Based on: 10-K (filing date: 2020-02-24), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 9,0185.06% × 73,687 = 5,287

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.’s economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Coca-Cola Co., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income attributable to shareowners of The Coca-Cola Company 8,920  6,434  1,248  6,527  7,351 
Deferred income tax expense (benefit)1 (280) (450) (1,256) (856) 73 
Increase (decrease) in allowances2 23  12  11  114  21 
Increase (decrease) in equity equivalents3 (257) (438) (1,245) (742) 94 
Interest expense 946  919  841  733  856 
Interest expense, operating lease liability4 42  10 
Adjusted interest expense 988  929  850  742  865 
Tax benefit of interest expense5 (207) (195) (297) (260) (303)
Adjusted interest expense, after taxes6 780  734  552  483  562 
(Gain) loss on marketable securities (58) (3) (103) (140) (80)
Interest income (563) (682) (677) (642) (613)
Investment income, before taxes (621) (685) (780) (782) (693)
Tax expense (benefit) of investment income7 130  144  273  274  243 
Investment income, after taxes8 (491) (541) (507) (508) (450)
(Income) loss from discontinued operations, net of tax9 —  251  (101) —  — 
Net income (loss) attributable to noncontrolling interest 65  42  35  23  15 
Net operating profit after taxes (NOPAT) 9,018  6,482  (18) 5,782  7,572 

Based on: 10-K (filing date: 2020-02-24), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances.

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

4 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,392 × 3.00% = 42

5 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 988 × 21.00% = 207

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

7 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 621 × 21.00% = 130

8 Elimination of after taxes investment income.

9 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.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Coca-Cola Co., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Income taxes from continuing operations 1,801  1,623  5,560  1,586  2,239 
Less: Deferred income tax expense (benefit) (280) (450) (1,256) (856) 73 
Add: Tax savings from interest expense 207  195  297  260  303 
Less: Tax imposed on investment income 130  144  273  274  243 
Cash operating taxes 2,158  2,124  6,840  2,428  2,226 

Based on: 10-K (filing date: 2020-02-24), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25).

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.’s cash operating taxes decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Invested Capital

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

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Loans and notes payable 10,994  13,194  13,205  12,498  13,129 
Current maturities of long-term debt 4,253  4,997  3,298  3,527  2,677 
Long-term debt, excluding current maturities 27,516  25,364  31,182  29,684  28,407 
Operating lease liability1 1,392  467  510  645  679 
Total reported debt & leases 44,155  44,022  48,195  46,354  44,892 
Equity attributable to shareowners of The Coca-Cola Company 18,981  16,981  17,072  23,062  25,554 
Net deferred tax (assets) liabilities2 (128) (734) 2,191  4,039  4,923 
Allowances3 524  489  477  466  352 
Equity equivalents4 396  (245) 2,668  4,505  5,275 
Accumulated other comprehensive (income) loss, net of tax5 13,544  12,814  10,305  11,205  10,174 
Equity attributable to noncontrolling interests 2,117  2,077  1,905  158  210 
Adjusted equity attributable to shareowners of The Coca-Cola Company 35,038  31,627  31,950  38,930  41,213 
Marketable securities6 (5,506) (7,051) (7,547) (6,115) (8,567)
Invested capital 73,687  68,598  72,598  79,169  77,538 

Based on: 10-K (filing date: 2020-02-24), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25).

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

5 Removal of accumulated other comprehensive income.

6 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.’s invested capital decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Cost of Capital

Coca-Cola Co., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 251,625  251,625  ÷ 296,736  = 0.85 0.85 × 5.69% = 4.83%
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 5.06%

Based on: 10-K (filing date: 2020-02-24).

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 × 5.69% = 4.65%
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 4.95%

Based on: 10-K (filing date: 2019-02-21).

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 × 5.69% = 4.52%
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 4.75%

Based on: 10-K (filing date: 2018-02-23).

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 × 5.69% = 4.51%
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 4.71%

Based on: 10-K (filing date: 2017-02-24).

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 191,191  191,191  ÷ 236,307  = 0.81 0.81 × 5.69% = 4.61%
Debt3 44,437  44,437  ÷ 236,307  = 0.19 0.19 × 1.35% × (1 – 35.00%) = 0.17%
Operating lease liability4 679  679  ÷ 236,307  = 0.00 0.00 × 1.35% × (1 – 35.00%) = 0.00%
Total: 236,307  1.00 4.77%

Based on: 10-K (filing date: 2016-02-25).

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, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 5,287  3,083  (3,463) 2,053  3,870 
Invested capital2 73,687  68,598  72,598  79,169  77,538 
Performance Ratio
Economic spread ratio3 7.17% 4.49% -4.77% 2.59% 4.99%
Benchmarks
Economic Spread Ratio, Competitors4
PepsiCo Inc. 8.13% 9.57% 2.23% 6.48% 4.23%

Based on: 10-K (filing date: 2020-02-24), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 5,287 ÷ 73,687 = 7.17%

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.’s economic spread ratio improved from 2017 to 2018 and from 2018 to 2019.

Economic Profit Margin

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

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 5,287  3,083  (3,463) 2,053  3,870 
Net operating revenues 37,266  31,856  35,410  41,863  44,294 
Performance Ratio
Economic profit margin2 14.19% 9.68% -9.78% 4.90% 8.74%
Benchmarks
Economic Profit Margin, Competitors3
PepsiCo Inc. 7.18% 8.95% 2.02% 6.12% 4.04%

Based on: 10-K (filing date: 2020-02-24), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net operating revenues
= 100 × 5,287 ÷ 37,266 = 14.19%

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’s 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.’s economic profit margin improved from 2017 to 2018 and from 2018 to 2019.