Microsoft Excel LibreOffice Calc

Coca-Cola Co. (KO)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Free Cash Flow to The Firm (FCFF)

Coca-Cola Co., FCFF calculation

USD $ in millions

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12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income attributable to shareowners of The Coca-Cola Company 6,434  1,248  6,527  7,351  7,098 
Net income attributable to noncontrolling interests 42  35  23  15  26 
Net noncash charges 2,046  2,183  2,467  3,319  3,930 
Net change in operating assets and liabilities (1,202) 3,529  (221) (157) (439)
Net cash provided by operating activities 7,320  6,995  8,796  10,528  10,615 
Interest paid, net of tax1 703  537  534  395  380 
Purchases of property, plant and equipment (1,347) (1,675) (2,262) (2,553) (2,406)
Proceeds from disposals of property, plant and equipment 245  104  150  85  223 
Free cash flow to the firm (FCFF) 6,921  5,961  7,218  8,455  8,812 

Based on: 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), 10-K (filing date: 2015-02-25).

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Item Description The company
FCFF Free cash flow to the firm is the cash flow available to the Coca-Cola Co.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made. Coca-Cola Co.’s FCFF declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Interest Paid, Net of Tax

Coca-Cola Co., interest paid, net of tax calculation

USD $ in millions

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12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Effective Income Tax Rate (EITR)
EITR1 19.30% 29.00% 19.50% 23.30% 23.60%
Interest Paid, Net of Tax
Interest paid, before tax 871  757  663  515  498 
Less: Interest paid, tax2 168  220  129  120  118 
Interest paid, net of tax 703  537  534  395  380 

Based on: 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), 10-K (filing date: 2015-02-25).

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2018 Calculations

2 Interest paid, tax = Interest paid × EITR
= 871 × 19.30% = 168

Enterprise Value to FCFF Ratio, Current

Coca-Cola Co., current EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Selected Financial Data (USD $ in millions)
Enterprise value (EV) 241,310 
Free cash flow to the firm (FCFF) 6,921 
Ratio
EV/FCFF 34.87
Benchmarks
EV/FCFF, Competitors
PepsiCo Inc. 27.05
EV/FCFF, Sector
Beverages 29.68
EV/FCFF, Industry
Consumer Goods 23.57

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

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Enterprise Value to FCFF Ratio, Historical

Coca-Cola Co., historical EV/FCFF calculation, comparison to benchmarks

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 225,735  216,786  203,047  215,714  203,912 
Free cash flow to the firm (FCFF)2 6,921  5,961  7,218  8,455  8,812 
Ratio
EV/FCFF3 32.62 36.36 28.13 25.51 23.14
Benchmarks
EV/FCFF, Competitors
PepsiCo Inc. 24.55 22.21 20.92 18.75 19.98
EV/FCFF, Sector
Beverages 27.39 29.70 24.26 22.09 21.59
EV/FCFF, Industry
Consumer Goods 21.62 28.85 28.60 25.60 24.37

Based on: 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), 10-K (filing date: 2015-02-25).

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2018 Calculations

3 EV/FCFF = EV ÷ FCFF
= 225,735 ÷ 6,921 = 32.62

Ratio Description The company
EV/FCFF Enterprise value to free cash flow to the firm is whole company valuation indicator. Coca-Cola Co.’s EV/FCFF ratio increased from 2016 to 2017 but then slightly declined from 2017 to 2018.