Syndicate 1 Apsha A. • Bayu Adhika • Bhayu Tri • Mira Seroya • Ryan Eryandez • Wira Budi

Valuing Coca Cola Stock

Company Background

•  Introduced on 1886.

•  Based in Atlanta, Georgia. United States

•  Coca Cola Company is a leader in the global soft drink market.

•  the company is best known for its flagship product Coca Cola

Primary Industry

•  Marketing of their products

•  Manufacturing syrups & concentrates for

their drinks.

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Management

1.  CEO : Muhtar Kent

2.  CFO : Gary Fayard

3.  CTO : Guy Wollaert

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Competitor

Problem Definition

•  The calculating price would match the current price ?

•  Overvalued or Undervalued ?

•  The stock was a good buy or not?

•  Reconsider the assumption and model inputs?

•  Current price of Coke had slipped to $58 per share with a PE Ratio of 35 times and a dividend yield of one percent.

Capital Asset Pricing Model (CAPM) & Divident Discount Model (DDM)

CAPM:

Methods for estimating an equity investor’s required return

CAPM = Rf + Beta (Rm-Rf)

Ke : Cost of Equity Re : Rise free rate

Beta of security Rm : Expected market return (IHSG)

Capital Asset Pricing Model (CAPM) & Divident Discount Model (DDM)

DDM:

Valuing the price of a stock by using predicted dividends and

discounting them back to present value

Capital Asset Pricing Model (CAPM) & Divident Discount Model (DDM)

• Cost Of Equity = Rf + Beta (Rm-Rf)

= 6,22 % + 1,24 * (6%)

= 13,66 %

• Value of stock = Divident / Ks - growth

•  Value of stock 1997 = $ 0,56

0,136 – 0,12

= $ 31,25

•  Value of stock 1998 = $ 0,62

0,136 – 0,1071

= $ 21,45

P / E 1997 = Price / Earnings

34,32 = Price / 1,7

Price = $ 58,34

P/E Multiple

P/E 1998 = Price / Earnings

37,4 = Price / $1,95

Price = 37.4 * $1,95

Price = $72.93

Average P/E Coca Cola is 35 x.

Estimated EPS 1997 : $ 1,7

Estimated EPS 1998 : $ 1,95

Coca Cola Selected Earnings and dividen informations

Market Price and Stock Value 1997,1998

0 10 20 30 40 50 60 70 80 

Year 1997 

Year 1998 

Market Price 

Stock Value 

• Stock prices are too expensive and not worth with the actual

value of the shares (Overvalued)

• factors they may look at is the price to earnings (P/E) ratio in

comparison to the company's peers, and the price to

earnings growth (PEG) ratio to determine if a stock is

overvalued.

Decision

Conclusion & Recommendation

Coca cola

investor Hold not to investing

Stock price more high

Stock Split

Thank you