Coca-Cola (KO): Is the Classic Defensive Staple Mispriced After Its Recent Pullback?

Coca-Cola (KO) has slipped about 1% over the past week and roughly 1% over the past month, even as its past 3 months and one year returns remain comfortably positive for long term shareholders.

See our latest analysis for Coca-Cola.

With the share price at about $70, a modest pullback in the past month contrasts with a solid year to date share price return and healthy double digit total shareholder returns, suggesting momentum is moderating rather than breaking.

If Coca-Cola has you thinking about what else is working in defensives, this could be a good moment to explore other established healthcare stocks for long term stability.

With Coca-Cola trading about 13% below consensus targets and roughly 22% under some intrinsic value estimates, are investors overlooking a classic defensive compounder, or is the market already factoring in its next phase of predictable growth?

Most Popular Narrative Narrative: 3.8% Overvalued

Compared with the last close near $70, the fair value in the narrative sits slightly lower, framing Coca-Cola as a gently overextended defensive.

In discounted cash flow (DCF) analysis, the discount rate represents the cost of capital investors demand for future cash flows. A lower Fed Funds rate reduces borrowing costs and the weighted average cost of capital (WACC). Even a quarter-point cut can noticeably lift the present value of a durable cash generator like Coca-Cola.

Read the complete narrative.

Curious how modest growth, firm margins and a premium earnings multiple still point to upside potential? The narrative fuses all three into one ambitious cash flow roadmap. Want to see the exact assumptions that turn those inputs into a higher long term valuation?

Result: Fair Value of $67.50 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain if rate cuts stall or reverse, or if health regulation and sugar taxes compress Coca-Cola’s premium margins and valuation multiples.

Find out about the key risks to this Coca-Cola narrative.

Another View on Value

Our SWS DCF model paints a very different picture, pointing to a fair value near $89.90 per share, which would make Coca-Cola look meaningfully undervalued at today’s price. That gap hinges on long term cash flow assumptions, so how comfortable are you with those inputs?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Coca-Cola for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 912 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Coca-Cola Narrative

If you see the story differently or prefer digging into the numbers yourself, you can build a complete narrative in just a few minutes: Do it your way.

A great starting point for your Coca-Cola research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

Ready for your next investing move?

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• Position yourself ahead of sentiment shifts by evaluating these 912 undervalued stocks based on cash flows that the market may be mispricing today.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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