- Your term project is to do a financial research analysis on the subject company and evaluate its worthiness for investment.
- The project report should have the following sections:
• Historical Performance and Price
• News and Highlights
• Financial Statements Summary
• Ratio Analysis
• Capital Structure
• Equity Valuation and Price Target
• Investment Upsides and Risks
• Investment Recommendation
This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.Introduction
Coca Cola is one of the most well-known company’s on the planet. It was founded in 1886 offering the first soda fountain drink for five cents at Jacob’s Pharmacy in Atlanta Georgia . The secret formula for the soft drink was created by John Pemberton and has been protected ever since. Today Coca Cola has sales of over $48 billion and income of over $9 billion annually . Its business model is now based on the “Coca Cola System” which is a partnership with suppliers and customers. They have over 275 bottling partners that sell to “customers” (such as grocery stores) who then sell to ultimate consumers.
This paper looks at Coca Cola’s financials to determine the strength of its fundamentals and make a recommendation regarding the stock. It has strong financials and solid revenue and earnings growth. The price-earnings ratio is close to, but not above the industry average. The analysis supports a buy/hold recommendation.
Historical Performance and Price
Coca Cola’s stock price ranged from about $18.00 to just over $40.00 over the period from 2003 rto 2012. (See Exhibit 1). Coca Cola’s common stock (LO) took a hard hit during the financial crisis but since the end of 2009 it has broadly outperformed the S&P 500 stock index. This is illustrated in Exhibit 2. Coca Cola’s most recent stock price high was $40.56 in July of 2012. Over the past six months however, Coca Cola has underperformed the S&P 500. (See Exhibit 3). Coca Cola’s stock does have a lower beta than the broader stock market (.52 relative 1.0), so this is not necessarily a cause for concern.
From 2006 through 2010 the average monthly return for Coca Cola was 1.2% and for the S&P 500, it was 0.15%. From 2011 through February 2013 the average monthly return for Coca Cola was 1.2% and for the S&P 500, it was 0.15%. The monthly standard deviation of returns for both Coca Cola and the S&P 500 were similar over the two periods: approximately 5% for 2006-2010 and 3.4% for 2011 through February 2013....