Apparently I’m not the only one thinking about Coca Cola (KO). I was reviewing the Safe Haven website today, and I discovered a new article that focuses on Coca Cola’s stock price. As of this moment KO is still above $40, so I’m not too excited yet. However, I found it interesting to read what Brady Willett of FallStreet.com thought of Coca Cola’s stock price:
To better understand how the longest bull market in history has severely change the expectations of Coke investors look at it this way: if you had invested $1 in Coca-Cola in 1983 you would have purchased a company with 54 cents/share in net equity and you would have earned 9 cents a year in earnings. For a $1 investment today you get 13 cents in net equity and 4 cents/share in earnings annually.
My general speculation is that at 15 times earnings Coke is an excellent stock to look at. At $30/share this would only bring the price to free cash flow ratio on Coke down to 23 times. However, remember that dividends will continue to be dolled out by the company.
I tend to agree with Brady’s analysis. We’ll have to wait and see if Coca Cola presents itself as a real fat pitch in the coming months. For now, it’s time to move on and look at other opportunities.