AvoidMedium convictionOpen
Coca-Cola Consolidated
Avoid. Strong business at a poor valuation, compounded by unsustainable share repurchases and macroeconomic concerns.
- Thesis
- Unlikely to outperform due to labor inflation, tariffs, increased leverages impacting their pricing power. Will rely on purchases of leased facilities to boost gross margin by decreasing COGS. Share repurchases funded by debt are unsustainable long term. Would buy at lower valuation more in line with intrinsic value as overall strategy (factory purchases, distribution, pricing algorithms) is strong.
- Key assumption
- I assume pricing elasticity is exhausted by the 30% cumulative price hike, meaning further price increases will trigger direct volume destruction at Walmart and Kroger (29% of revenue). I assume that gross margin expansion from facility buyouts and supply-chain algorithms cannot outpace ongoing labor inflation, input commodity costs, and the debt-service burden from recent borrowing.
- What would prove me wrong
- Continued resilience in consumer demand where transaction counts and volumes remain flat or grow even after aggressive price increases. That would prove the brand moat belongs functionally to the distributor's territory, sustaining higher margins permanently. Secondly, if The Coca-Cola Company intentionally keeps concentrate pricing concessions favorable to ensure bottler balance-sheet health while the bottler consolidates leased facilities and automates distribution centers.
Entry$165.78
Price now$189.02marked 10 Sep 2026
Price move+14.0%not a position
Benchmark+10.7%S&P 500
Worth avoiding−3.3 ppagainst holding the index
Held9 monthsopen
- Sells and distributes Coca-Cola products along with other beverages. 13 manufacturing facilities, 80 distribution and warehouses.
- Coca-Cola company manufacturers key components like concentrates and syrups, but partners mix these, bottle and distributed them.
- KO owns 35% of company’s common stock, with 7% voting power, while CEO and chairman has 72% (up to 78% in options) voting power. Served since 1996 (age 70).
- Low work wellbeing ratings on Indeed, with 65/100 and 3.0.
- 85% of products are from The Cola-Cola Company.
- Sales fall under two categories, bottle/can sales and other. Other includes sales to other Coca-Cola bottlers, post-mix (syrups etc.) sales, transportation revenue, and equipment maintenance revenue.
- Agreement in place whereby Coca-Cola must approve other brands to be manufactured in COKE facilities like Dr. Pepper, Monster Energy.
- They reserve the right to set prices within a range (implied) and the prices at which Coca-Cola sells its concentrate to COKE is flexibly set using a formula that considers a range of factors.
- All plastic bottles are purchased from two cooperatives co-owned by COKE and other bottlers. Aluminum comes from two domestic suppliers.
- 47% bottles and 53% cans. Walmart and Kroger make up 36% of sales volume and 29% of revenue.
- Slight outperform from AI stock analysis, with around 10% upside. Cites high leverage, declining FCF, and cost pressures.
- Significant price increase this year (up 30%).
- Financial strength (7): poor equity to asset and DOE vs industry, excellent vs history. Interest coverage good, F-Score 6, Z-Score safe and ROIC > WACC (significantly).
- Growth (6): average 3Y revenue growth rate, good EBITDA growth rate particularly vs history. Good 3Y EPS growth rate and average FCF growth rate. Book growth rate is excellent at 28.9%.
- Momentum (6): slightly overvalued RSIs, but strong price momentum.
- Liquidity: good ratios vs industry and very good vs history. Days inventory is good vs industry but very poor vs history. Days sales outstanding is also poor vs history.
- Dividend and buy back: very poor dividend yield, particularly vs industry, good vs history. Dividend payout ratio is excellent. 3Y dividend growth rate is good, while forward dividend yield is terrible. 3Y average share buyback ratio is excellent, while shareholder yield is negative.
- Profitability (8): margins are excellent vs history are mostly good vs industry. ROE is excellent and ROIC too vs industry and history. 3Y ROIIC is incredible, and ROC too. 9/10 years of profitability. 8 moat score, 6 tariff resilience.
- Value (3): below average PE industry and history and average PS. Shiller PE ratio is terrible vs industry, while PEG ratio is strong. PB ratio is terrible vs industry and history. Very poor price to tangible book for a manufacturing company. Price to FCF is average, while price to OCF vs history is poor (spending less on CapEx comparatively, bolstering valuation?). EV ratios average. Undervalued according to Peter Lynch fair value. FCF yield is good and forward rate of return is excellent.
- Revenue growth is strong but slowing recently, while net income growth is gradually increasing but slowly.
- Debt decreased significantly until 2024, while massive debt was take on and cash increased to similar levels because of this, cash was only a small fraction of debt in past years.
- OCF has increased and FCF increased inconsistently. Stock based comp is non-existent.
- ROIC significantly outpaces WACC.
- Diluted -27% of shares in 2018, but bought back 7% in 2024 and continues to do in 2025 at a smaller scale, typically share dilution was -0.03% annually prior to this shift.
- Total assets is increasing slowly while total stockholders equity also shows slight growth since a dip in 2024 (when total assets peaked).
- 26% tax rate. 100% revenue from United States.
- EPS growth is significant since 2020 due to margins improving, however margin growth is dipping/stagnating. Gross margin improvement is mostly the cause. Margin improvement from price increases, operational efficiencies (e.g. supply chain optimization) and purchasing leased production facilities.
- Significantly overvalued according to GF with share price far outpacing correlations.
- 14.54% reverse DCF growth rate (EPS without NRI). 30% margin of safety with 20% EPS growth rate and 23% with 20% FCF growth rate. $122 intrinsic value with 10% EPS growth rate. $100.54 (-65% MOS) with TTM growth rate of 7.65% EPS.
- Summary: unlikely to outperform due to labor inflation, tariffs, increased leverages impacting their pricing power. Will rely on purchases of leased facilities to boost gross margin by decreasing COGS. Share repurchases funded by debt are unsustainable long term. Would buy at lower valuation more in line with intrinsic value as overall strategy (factory purchases, distribution, pricing algorithms) is strong.
Updates
The note above is unedited. Anything that changed goes below it, dated.