General Stock Analysis Paper on the Coca-Cola Company

The Coca-Cola Company is a beverage multinational company from the United States. It manufactures markets and retails nonalcoholic syrups and concentrates. The company’s headquarters is in Georgia, Atlanta. The Coca-Cola Company is famous for its leading beverage, the Coca-Cola soda that was invented in 1886. The Coca-Cola Company has been incorporated since year 1892. Since then, the company has been operating franchised distributed systems. The company has its anchor bottler facility in Georgia where it produces the syrup concentrate and sells it to bottlers across the world. The company’s stock features in the New York Stock Exchange. Its stock is also included in the S&P 500 Index, DJIA Index, Russell 1000 Index, as well as the Russell 1000 Growth Stock Index (The Coca-Cola Company 1).

The Coca-Cola Company Competitors

With respect to the profitability in the beverage industry, the Coca-Cola Company shares the market with a couple of other companies. However, the major competitors include three: PepsiCo, Inc., Nestle S.A., and Dr. Pepper Snapple Group, Inc. (DPS). PepsiCo has always been second to Coca-Cola. Its main brands of beverages are Pepsi, Mountain Dew, and their respective dietary alternatives. Pepsi also bottles and sells juices and sports beverages. DPS bottles and distributes a huge portfolio of non-alcoholic beverages in Mexico, the United States, and Canada. It is the third in the beverage market after Coke and PepsiCo. Nestle S.A. deals with the production and distribution of baby drinks, bottled water, and instant coffee. It leads significantly in the production and distribution of bottled water (The Coca-Cola Company 1).

Recent Company News

As a multinational company, the there are a lot of news revolving around it from various points of view. For instance, below is some of the important news for the year 2015 according to major news channels. At the beginning of the year, a historian portrayed The Coca-Cola Company as a burden to the international public health, stating that its profits depend majorly on infrastructures in other nations. In mid-January, the company announced its plans to eliminate jobs to the tune of 1800 in a bid to reduce costs. At the start of February, The Coca-Cola Company diversified its product portfolio by introducing Fairlife Milk as a result of many Americans reducing or quitting soft drink consumption. In the same month, the company indicated that charges and fluctuations in currency from its Venezuela market plunged its respective earnings in that market by 55%. February ended in a negative tempo as ten people got injured in Southern Mexico during an attack attempt in the company’s offices in the city of Chilpancingo. Additionally, the company had more sad news as Mr. Donald Keough, the strategist who helped the company through the debacle of New Coke, died at the age of 88yrs (Topics.nytimes.com 1).

Historic Stock Performance

An ideal way of determining the growth of a company is by tracking its historic performance in various aspects. For the stakeholders of the Coca-Cola Company, the performance of the company’s stock in the stock exchange is the key determiner of growth. According to the historic performance of the company, the last ten years has been quite a success for the company’s stock. Apparently, the company’s stock price has grown by about 20 dollars in the last ten years despite all the financial crises that have happened in that period. The chart
below illustrates the above information (Finance.yahoo.com 1).

Accounting Ratios

Accounting ratios are very important in analyzing the various aspects of a company’s financial position. The ratios are based on data and information in the financial statements.

Return on Equity: The above is a ratio of the net income from the total shareholder’s equity. As at the end of year 2014, the net income and the total shareholders’ equities were 7,098 and 31,746.5 million dollars, respectively. Therefore, the ROE is 7,098 / 31,746.5, which translates to 22.36%. Such a return on investment is good. However, even if it indicates growth chances for Coca-Cola, it is a drop from the previous years’ figures. The above indicates the increasing competitive nature of the company’s industry.

Loss Ratio, Expense Ratio, and Loss Reserve-to-Surplus Ratio: The above three ratios use information relating to insurance. However, the financial statements of the Coca-Cola Company do not indicate any information relating to the above. The main reason for the above could have happened as a result of company assimilating insurance premiums as operating costs. However, it is possible to get relatable information by using data in the financial statements. Since insurance premiums are an investment in the safety of the company’s stock, the Return on Investment (ROI) figure provides relatable analysis. From the 2014 records, ROI, which is a ratio of the Invested Capital over the Average Invested Capital, is 14.78%. By viewing insurance premiums as an investment on the security of the company’s assets, the above figure means that the Coca-Cola’s insurance investment pays off.

Interesting Factors about Coca Cola

There are many interesting factors about the Coca-Cola Company. A few of the intriguing include the following (Topics.nytimes.com 1):

  • The company was invented in the 19th century and thus has existed for almost 130 years.
  • Originally, the invention of Coca-Cola aimed at treating a couple of diseases such as impotence and headache.
  • The company started sponsoring the Olympics games in 1928 making it the oldest sponsor of these games.
  • According to statistics, the entire world consumes over 8000 glasses of Coca-Cola products every second.
  • Amazingly, the company’s brand has a portfolio of over 3,500 other beverages different other Coca-Cola.

Future Outlook of Coca Cola

Long before the preparation of the company’s financial report as at the end of year 2014, the management of Coca-Cola Company provided various business updates as well as the outlook for the future. Some of the details in the future outlook of the company include the following (The Coca-Cola Company 1):

  • In the long term, the company has plans to yield better returns and to deliver more than the growth rate expectations. However, there is no expected growth in EPS in the short term in comparison to the figure in 2014
  • With respect to the spot rates at the end of 2014, the company has an expectation of a 5 to 6 headwind points in terms of pre-tax profits starting at the end of year 2015.
  • With respect to the effective annual tax rate as at the end of 2014, Coca-Cola Company expects the future operations to yield an increase, starting at 22.5% at the end of year 2015.

References

Finance.yahoo.com. ‘Coca-Cola (KO) Interactive Stock Chart | Yahoo! Inc. Stock – Yahoo! Finance’. N.p., 2015. Web. 29 Apr. 2015.

The Coca-Cola Company. ‘The Coca-Cola Company Provides Business Update And Outlook Ahead Of Modeling Call’. N.p., 2015. Web. 29 Apr. 2015.

Topics.nytimes.com. ‘Coca-Cola Company’. N.p., 2015. Web. 29 Apr. 2015.

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