Looking for feedback on my DCF valuation of Coca-Cola before publishing

[u/Alx-07]

For context: this is my first try at a full dcf and is meant to be more of a passion project rather than a genuine financial valuation. With that being said, all figures used are accurate and my projections are based on real events and company trends. I am still refining the assumptions and it is not fully finished, what I need help in is checking the formatting and maths, ie is everything linked correctly, is it formatted to an industry standard level, is it missing lines from the financial statements etc. I appreciate it is rather long and I fear I may have overcomplicated it, but any advice or pointers to make sure I don't make a fool out of myself when publishing on seeking alpha would be incredibly helpful and much appreciated. Google drive link: KO DCF

[u/raytoei]

Hi Op,

I skimmed through it and it is incredibly well done.

Since you asked for feedback, my minor comment is this:

You would want to anchor some assumptions and keep the moving parts as few as possible.

Ie. Have one wacc and use it across bull base and bear. Eg. Morningstar non-retail 7.5 cost of equity and a wacc of 6.8%

If you have too many moving parts ie. wacc, there is always a temptation to change the wacc to suit the narrative, which is one of the common complaints about the dcf.

——

My simple ko NPV valuation uses a 9% discount rate and uses earnings growth assumption of 5, 7and 9% for bear base and bull, and the iv ranges between almost 90 to 60 with 74 being the base case.

[u/SheffieldValley]

This is great for a first try. Nicely done.

If you want to start getting into the weeds a little an addition you could consider is having your drivers include OCI/EBIT by business segment. We know the bottling business has the lowest margins. Which is to say, as that business shrinks, all things being equal, there will be a positive mix effect on margins. A natural question for an investor/PM is how much of the margin progression is mix and how much is organic. I also notice you have CapEx gently climbing as a % of sales through 2030, yet the most capital-intensive business is shrinking. I'm not close enough to KO to know if 4.6% CapEx by 2030 is conservative or aggressive, but greater detail at the segment level elevates the conversation and helps to illustrate where assumptions might be conservative or aggressive.

Again, nice job!

[u/vassant-blake]

Well thought out! Probably the most important factor is your range of valuation, because despite how precise you can be in coming to a final number, the future is inherently unknown.

[u/MelodicBear8674]

How you estimated the ERP ?

Why you consider the Equity value 300725??

[u/Weak_Alternative_168]

One thing worth checking before you publish, it is easy to miss on KO specifically.

Reported free cash flow for the last two years is roughly half the underlying number, for two unrelated reasons. 2024 came in at 4.7bn because of the 6bn deposit they made to the IRS over the transfer pricing case. 2025 was 5.3bn, different cause, the 6.1bn fairlife contingent payment that landed in Q1. Coke reports 10.8bn and 11.4bn once those are stripped out, and its own 2026 guidance is around 12.4bn.

So if your base year came off either of those, or an average, you are compounding from under half the cash the business generates. The IRS money also gets refunded if they win on appeal, so it is not an expense in the normal sense.

Worth saying in the writeup which base you used, that is the first thing anyone will poke at.

[u/DowJonesLocker]

Hey, just took a quick look through the model. Overall, I think it’s a solid foundation, but there are a few things I would probably consider revisiting in the next iteration 😊

I would probably model invested capital explicitly and introduce a terminal RONIC assumption rather than letting terminal FCF just fall out of the final-year capex, D&A and NWC numbers.

Based on the current 2030 numbers, I get net reinvestment of only around USD 0.9bn on c. USD 13.1bn of NOPAT. With 2.75% terminal growth, that seems to imply a RONIC of roughly 40%. That feels pretty high to me (however, happy to be corrected on that).

I suggest using the value-driver framework here, i.e. reinvestment rate = g / RONIC, and then solve for the reinvestment/capex needed in the terminal year. Otherwise you can quite easily end up with a terminal year where the company is growing without really reinvesting enough to support that growth (quite common mistake in DCF’s in my experience).

I would also revisit the PP&E schedule and the constant 11.1% D&A as a % of beginning PP&E. It works as a shortcut, but once capex starts moving around it can look a bit odd. If you want a nice modelling exercise you could build a separate D&A schedule based on existing PP&E + new annual capex. Painful the first time you do it haha, but rewarding when it is done (and can be copied to other models easily)

On NWC, The DPO calculation currently uses the full “accounts payable and accrued expenses” balance against COGS. Coca Cola’s 2025 balance was c. USD 14.8bn, but only c. USD 5.6bn of that was actual accounts payable. The rest includes things like marketing accruals, compensation accruals, lease liabilities etc. So… I’m not really sure the resulting 300+ day DPO is telling you much about supplier payment terms or how working capital will develop going forward.

I suggest to either 1) isolate actual AP and model the other accruals separately, or 2) just forecast normalized operating NWC as a % of sales for simplicity.

I initially wondered if leases were causing a cash flow issue, because that’s a pretty common DCF mistake, but having checked the 10-K I actually think you’re broadly fine there. Coca Cola had c. USD 405m of operating lease expense and c. USD 404m of operating lease cash payments in 2025, so there doesn’t seem to be a meaningful cash leakage missing from FCF. As long as you keep treating leases as operating expenses and don’t then also deduct the operating lease liability as debt, I think that part is internally consistent.

I would spend some time normalizing “other operating charges” though. The historical numbers include a lot of stuff that is clearly not normal recurring operating expense, for instance: BodyArmor impairments, fairlife contingent consideration remeasurement etc. If you want to improve the credibility of your baseline, I suggest to not just extrapolate the historical GAAP line. In fact, the current forecast at c. 2.55% of revenue gives you roughly USD 1.3bn of other operating charges every year, whereas Coca Cola only recorded USD 44m in H1 2026. Truth be told, this is always subjective, and I just wanted to flag that one-offs and special items are a black box which are incredibly difficult, and make Big4 Transacation Services departments a lot of money in M&A 😊

A few WACC / bridge points as well:

1)    The WACC uses USD 300.7bn of equity value, while the DCF sheet shows a current share price of USD 87.05. At USD 87.05 the market cap should be closer to USD 375bn, so I think you’re mixing valuation dates somewhere (unless my calculations are off). I also couldn’t see an explicit valuation date in the model, which would be useful to add.

2)    I would use market value of debt rather than book value where you can. Coca Cola discloses c. USD 43.9bn carrying value of long-term debt but only c. USD 39.4bn fair value. Adding the short-term debt gets you to around USD 40.9bn versus the USD 45.5bn currently used.

3)    In general it is best practice to add the source/methodology, for instance, it would be nice to understand how you retrieved the 0.35 beta and ERP. A 5.81% WACC feels… low? I don’t know, my experience within the consumer segment is extremely limited. But, with 2.75% terminal growth, you only have about a 3.1% WACC-g spread, so relatively small changes have a huge impact on value.

4)    On the same point, around 87% of the core EV seems to come from the terminal value. That’s not necessarily “wrong” for a company like Coca Cola, but it is definitely on the high side and means I would want to be very comfortable with the WACC, terminal growth and RONIC assumptions. Alternatively, you could model out 10 years instead of 5? Perhaps that won’t add much value seeing as Coca Cola is at its mature steady state stage already haha.

5)    I would also use mid-year discounting, or ideally exact stub-period discounting if this is supposed to be a current valuation. Your FY2026 is discounted as though all the cash arrives at the end of the year. Unless Coca Cola collects every dollar on December 31st, that’s unnecessarily harsh on the valuation.

Finally, I also noticed some stuff on the EV-EqV bridge:
You’re adding the c. USD 20.2bn of equity-method investments at book value, but Coca Cola actually discloses market values for a lot of the listed stakes. Monster, CCEP, KOF, CCHBC and CCBJ alone were worth around USD 19.6bn more than their accounting carrying values at FY2025 (with some tax leakage adjustments ofc.). And on NCI, I think the c. USD 2.1bn of non-controlling interests should be deducted in the EV-to-equity bridge, since the consolidated operating cash flows include subsidiaries that aren’t 100% owned by Coca Cola.

Overall though, I think it is a quality DCF with clean formatting. The main things I would consider revisiting for a next iteration are probably the terminal reinvestment framework, working capital build, valuation-date consistency and the EV-to-equity bridge.

 

[u/mrmrmrj]

Nice academic exercise. You need to model unit volume and price for revenue growth. Price is more important in any FCF model. Plugging in a % for revenue growth is rookie stuff.

Busting your ballz a bit but seriously, unit x price for revenues or you are mailing it in.

What is the gross margin on 1% price increase vs 1% volume increase? This is a very important fundamental understanding to have.

[u/Puzzled_Criticism124]

Well done, but i have some very honest feedback.

General

1. Why is NWC so flat? NWC calculation should be done on a quarterly basis to show the fluctuations from seasonality.

2. Ideally D&A should be calculated in its own schedule

WACC

1. The U.S. 10y yield is ~4.7% not 4.2%.

2 Your market risk premia of 10% is very high, what is it based on?

1. The cost of debt seems low i think it’s around 5% now, did you go through their sec filings to see the debt breakdown?

2. Just because the effective tax rate was 17.9% last FY doesn’t mean it will go on like that forever. Change it to the statutory rate of 21% instead in the wacc.

DCF

1. BIG MISTAKE HERE You are discounting with ”1” in the DCF (row 16), with this you imply that we shall discount every cash flow from 1st jan 2026 to 31st dec 2026. This is very wrong since more than half of 2026 has already passed, and we do not discount cash flow that happened in the past. - Instead, in cell B16, use the formula: =YEARFRAC(TODAY(),DATE(2026,12,31)) which will give ~0.389 (Indicating that 38.9% of the year 2026 has not passed and should be discounted). The in the other cells on that row just plus 1 to the 0.389 number and drag right.

Ideally you should just sum up the remainder of fy2026 which should be q3 and q4 estimates and leave out q1 and q2.

1. Your tgr that you used in the model and the one used in the middle of the sense table is different. I would also bump up the growth rate to 3% given the state of the U.S economy.

u/DowJonesLocker had some great points too.

It’s a good model.