Consumer sector stocks are often added to investment portfolios as a conservative but steadily growing instrument. Food, beverage and personal care products will always be in some form of consumer demand, regardless of crises and the state of the global economy. One such company is Coca-Cola. The corporation has repeatedly been included in the TOP-10 most valuable companies in the world according to Forbes, Interbrand, etc. In this review you will learn more about how to buy Coca-Cola stock and the prospects for its quotes.
The article covers the following subjects:
Briefly About Coca-Cola (KO) Company
Coca-Cola is the largest manufacturer and supplier of soft drinks and soda. The history of the corporation began in the US in 1892. By 1899, the company launched the first plant for the production of the concentrate. Cocaine initially contained in it was removed from the recipe only 6 years later.
In 1919, the company attracted external investors for the first time – after the IPO, several investment funds bought part of the shares. In 1950, the company’s shares first appeared on the stock exchange. In 1987, the company entered the top thirty issuers that form the basis of the Dow Jones index.
Simultaneously with the development of production technology and the construction of an internal network of branch companies, the corporation maintains active marketing. Since 1928 to the present day, Coca-Cola has been a sponsor of the Olympic Games; in 1974, it began cooperation with FIFA. In 1985, Coca-Cola became the first beverage on the planet to go to space and be consumed by astronauts.
A few figures:
The company’s products are sold almost everywhere in the world. The exceptions are countries closed from the world (North Korea, Cuba, etc.).
The corporation has more than 500 brands of soft drinks, water, tea, coffee, milk, juices, isotonic and sports drinks. The corporation also owns brands of chips, rice, pasta, baby food, etc.
5 of the 6 best-selling beverages in the US are owned by Coca-Cola.
The corporation also has non-standard areas of investment. In the 1980s, Coca-Cola bought Columbia Pictures. Due to corporate conflicts, the company then sold it after 8 years of ownership, but not before it made Ghostbusters, Tootsie and Karate Kid.
Another out-of-the-box investment is Coca-Cola Starlight, a limited edition beverage with a pixel flavor that brings you “the joy of stargazing around a campfire” and “evokes the feeling of a cold, unpredictable, intriguing journey into the universe.” So far, the drink is exclusively virtual and available in the Fortnite Creative game. But the corporation plans to release it in the real world.
The corporation’s shares have shown stable growth with small local drawdowns. After more than 120 years since its founding, the corporation is confidently leading in a number of segments, leaving behind its closest competitor PepsiCo.
Should you Buy Coca-Cola (KO) Shares?
In the short term, corporate stocks can sink depending on the season, the general market situation, the actions of individual media persons and other factors. But in the long term, the price chart has a stable upward movement. The fact that its products are presented in different segments and are in demand in all countries of the world where they are sold speaks in favor of the company. The marketing and development policies allow it to remain competitive and in many respects outperform the main competitor PepsiCo. Another advantage of the corporation is a quarterly payment and a stable dividend yield, which will help reduce losses from local drawdowns.
Coca-Cola share price
Coca-Cola share price as of today, 22.08.2022, is 65.21 USD.
For more than 10 years from 1985, the corporation’s shares were worth between 2 and 10 USD, which is approximately 7-9% per year. A significant breakthrough occurred from 1994 to 1998 – during this period, shares rose by 4 times, reaching a historical high that then wasn’t updated for more than 15 years. After overcoming the mortgage crisis of 2008, the corporation’s shares have been steadily growing. And even with a temporary downturn during the pandemic, Coca-Cola shares continue to hit all-time highs.
Where and how to buy Coca-Cola shares
There are several options for buying Coca-Cola shares:
Exchange and stock brokers. Stock brokers have access to the US and European stock markets, where you can also buy Coca-Cola shares. Trading takes place online, the ownership of shares is recorded by the registrar. To buy the securities, you need to sign up and verify with the broker. Depending on the jurisdiction, you may also need the status of a Qualified Investor. If the broker does not work within your jurisdiction, you can try to enter the market through a sub-broker. It is also possible to execute transactions through banks that can open a securities account.
Shareholders. You can buy securities directly from shareholders through registrars and other intermediaries. The transaction is carried out online regardless of the location of its participants.
For private investors with relatively small capital, the first and third options are more suitable. For long-term investment, buying real shares on the stock exchange is more suitable. Short-term traders might be better off on forex since there is a lower commission per trade. It is possible to trade on ECN accounts without a broker commission.
Is It A Good Time To Buy The Coca-cola (KO) Company Stock?
It makes sense to buy Coca-Cola shares in the following cases:
The market has bottomed out and is turning into an uptrend. For example, sales in 2020 were negatively impacted by the pandemic, which led to a collapse in stock prices. Recovery in sales volumes is a reason to buy.
Ahead is the publication of financial statements and the forecast is positive. Consider the risks as well: if the financial performance is worse than the forecast, the quotes will drop, even if they are better than past results.
End of local correction. The idea is suitable for short-term strategies.
Below is a table with price changes for the last year as of July 16, 2022, indicating profitability for several periods.
Yield, %, provided the shares were sold before 15.07.2022
Conclusion. The return for the year was more than 10%, but in a shorter period, the investor could receive both a loss and a profit of almost 5%. Therefore, it makes sense to invest either for several years, or to buy securities in the short term on rollbacks.
What To Do Before Buying Coca-Cola (KO) Stocks?
Before buying Coca-Cola shares, you should do a macro- and microeconomic analysis. If the market is dominated by negative fundamentals pulling down the entire stock market, there is no point in buying stocks – wait for the recession to end and buy at the bottom. If the general market factors are favorable, the company should be evaluated from the inside based on financial indicators, multipliers, development forecasts, etc. Current indicators are compared with those of previous periods.
Key indicators of financial statements:
To analyze a company before buying, you can use auxiliary services, where basic information is accumulated and processed into statistics with graphical analysis. Examples of such services are simplywall.st, investing, etc.
Reports and trading journals
Fundamental information sources other than financial statements are reports, management releases, annual summaries, etc. For example, reports on entering new markets, launching new products, statistics for the financial year, etc. You can find this information on the company’s website.
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How To Trade Coca-cola (KO) Shares
CFDs are contracts for difference in prices for a particular asset. By investing in an instrument, you do not become the actual owner of the share, but you earn on the difference in quotes in case your forecast is correct. Pros: low entry threshold and minimal fees. For example, LiteFinance has an entry threshold of 50 USD, you can use leverage and buy Coca-Cola shares in compliance with risk management rules.
Algorithm for investing in Coca-Cola company shares:
1. Choose a broker, sign up, go through verification, and deposit money to your brokerage account. Signing up with LiteFinance takes 2-3 minutes. For verification, you need to confirm your identity and place of residence. You can try out a demo account, no registration is required.
2. In the LiteFinance terminal, in the vertical panel on the left, select “Trade”. In the horizontal menu, select the “NYSE Stocks” tab, find Coca-Cola stocks (ticker #KO).
Pay attention to the indicator “Market sentiment” – it shows the ratio of volumes for open long and short positions. It can be used as a hint. If the price is inactive, it means that the trading session is currently closed – wait for it to open.
3. Go to the asset card, you will automatically be taken directly to the trading platform. Set the timeframe in accordance with the chosen strategy: for intraday trading systems – M15-H1, for long-term – from D1. Use charting tools and technical analysis indicators to analyze the market.
4. In the right panel, set the trade volume in lots, set the values of stop loss and take profit orders. Open a long or short position.
5. The open position with a financial result will be displayed in the block below the price chart.
You will find a complete overview of the Personal Cabinet and the functions of the platform in the article “Getting Familiar with the LiteFinance Personal Cabinet”.
Coca-Cola trading hours
Coca-Cola CFD trading on the stock market is only possible at certain times when trading sessions are open. Trading session schedule: from Monday to Friday from 16.35 to 23.00 (LiteFinance trading terminal time). Stock exchanges do not work on public holidays.
Coca-Cola stock trading technical Information
|Current price per 1 share||65.21 USD|
|Headquarters||Atlanta (Georgia), USA|
|Par value||0.25 USD|
|Maximum volume||10,000 lots – one can buy or sell 10 thousand shares|
Coca-cola (KO) Fundamental Analysis
Fundamental analysis of financial statements allows you to answer the following questions:
How overbought or oversold are the shares currently? This describes how undervalued or overvalued they are relative to the state of the market.
Can the company service its debt and how much debt does the company have? Even a company showing stable profit growth can become bankrupt if it actually lives off credit funds. This also includes an analysis of the quality of receivables.
What is the company’s financial performance as compared to competitors and industry averages?
The analysis of multipliers helps to answer these questions.
Coca-Cola’s price-to-earnings ratio
P/E (price-to-earnings ratio) is the ratio of the current value of a share to EPS.
EPS = (Net income – Dividends) / number of ordinary shares
The multiplier shows how overvalued or undervalued the company’s shares are. The values of the coefficients can be interpreted in different ways. For example, if P/E = 15, EPS = 3, which means that the investment in these shares will pay off in 5 years.
Examples of the multiplier assessment:
A multiplier value of more than 20 indicates that the stock is overvalued or there is increased investor interest. A value less than 5 indicates underestimation or lack of interest.
The multiplier is compared with the dynamics of net profit growth. If both parameters are the same, the company is stable. If P/E is 2 or more times less, potential growth is possible.
There are several varieties of P/E:
Сoca-Cola’s relative dividend yield
Relative dividend yield is the ratio of the annual dividend per share to the share price. The dynamics of the coefficient is analyzed for different periods and it is also compared with the coefficients of companies in the same segment, provided that the company pays dividends. A low value indicates that the company is overvalued compared to its competitors.
Coca-Cola’s return on equity
ROE shows how effectively the shareholders’ investments are used (it should be stressed that it’s only the investments of shareholders and not the entire capital of the company). It is calculated as the ratio of net profit to the cost of equity capital. For example, a ROE value of 15% means that each shareholder’s 1 USD invested brings in 15 cents of profit annually.
Major Shareholders of Coca-Cola
Coca-Cola is a public company. Its shares are traded freely on the US and European stock exchanges, and the corporation does not have large shareholders who could radically influence the decisions of the shareholders’ meeting.
Berkshire Hathaway (Warren Buffett Foundation) – about 9%.
The Vanguard Group – about 6%.
State Street Corporation – about 3%.
The main shareholders are investment funds. The composition of the shareholders and shareholding may change at any time. A deal to buy / sell a package of securities can become momentum for a short-term price movement.
Factors influencing Coca-Cola quotes
Coca-Cola quotes depend on the following factors:
Sales volumes. The share price is sensitive to changes in the structure of consumer spending. As the economy grows, incomes rise and consumption rises. Therefore, positive macroeconomic statistics can become a strong driver of quotes.
Market share and competitive advantages. To strengthen its position, the company plans to restructure its brand portfolio and increase its presence in new markets. For example, it plans to expand the Costa Coffee chain bought in 2019.
Financial indicators. Financial statements, annual report, interim statistics, forecasts, releases. This may include acquisitions or sales of existing businesses.
General state of the market. This category includes geopolitical conflicts, trade wars, force majeure, including natural disasters that can affect the market in the short term.
At the time of analysis, it is important to take into account the strength of the factor in a particular time period. For example, during a general market stagnation, positive reporting will lead to a short-term increase in quotes, but the long-term trend will remain downward.
Pros to buying Coca-Cola (KO)
Thanks to the splits, the shares are available to any private investor. Compared to the shares of other companies, Coca-Cola has its advantages.
Coca-Cola is one of the most recognizable brands in the world with over 100 years of history. The corporation is a sponsor of sports organizations, and the Coca-Cola truck is the symbol of the New Year. The history of company development and brand management is laid out in textbooks on marketing and management.
Operational advantage and restructuring
The corporation is 1.2-1.5 times ahead of its closest competitors in terms of revenue and net profit. According to plans, the number of brands in the portfolio will be reduced by almost half, which will reduce revenue by only 1-2%. This will allow it to focus on high-priority and most profitable areas, as well as invest in innovative technologies.
The corporation is represented in almost all countries of the world. The structure of the company contains dozens of divisions and branches, which allows it to effectively manage the business locally, taking into account the specific featuress of regional legislation and mentality.
The low volatility of the shares is due to the fact that the company’s products are classified as inelastic goods – food and beverages react more slowly and weakly to price changes. When many companies record a loss, Coca-Cola will show a decrease in net profit, which practically does not affect dividends. The 5-year corporate volatility is 0.62, while the industry average is 0.75.
In 2022, the corporation became one of the “dividend kings” – companies that have consistently paid and increased payments to investors for at least 60 years in a row. As of January 2022, 39 stocks were on the list, but only 11 of them have shown payout growth for at least 60 consecutive years. Coca-Cola is among them. Dividends are paid quarterly. For example, in 2019, about $6.8 billion were paid out in dividends, which is approximately equal to the total capitalization of the corporation in 1985.
Cons to buying Coca-Cola (KO)
The main negative argument for buying Coca-Cola shares for an investor inexperienced in market analysis is the yield of securities – they grow too slowly. And one major pandemic class shock is enough for a year to turn out to be completely unprofitable. For example, from 2010 to 2020, the company’s shares showed an average growth of 10% per year. The NASDAQ index returned about 31% over the same period.
Stock returns lag behind those of, for example, tech companies. But at the same time, the consumer sector is more resilient in times of crisis. Therefore, it would be more correct to compare the profitability of shares with companies in the same segment.
High debt to equity
The corporation’s Debt to Equity Ratio (D/E) multiplier is gradually increasing.
This suggests that the company is using more and more credit funds that need to be serviced. Going forward, this will make it harder to get new loans and could lower dividend yields.
The level of consumption is influenced by healthy eating and environmental concerns. So the company has two key problems. According to WHO, Coca-Cola, Sprite, Fanta and other similar beverages are simply not healthy. They contain lots of sugar and synthetic additives that lead to obesity. An additional tax on sugar drinks has already been introduced in 65 countries. Coca-Cola can solve the problem by switching to new technology and developing other brands.
Another problem is the plastic used in the beverage containers. Since the corporation has the largest sales volume, it is, therefore, the largest plastic polluter of the environment. So far, the tax on plastic containers has not been introduced, but the company may face this problem unless it finds an alternative solution or invests in the recycling of container
Is Buying Coca-Cola (KO) Shares Worth It?
Coca-Cola is one of the most stable companies in the sector and its products will always be in demand. In the short term, seasonal changes, geopolitics, and economic crises can affect the quotes. But in the long run, the shares are slowly going up, showing an average return of 10% per year. Therefore, Coca-Cola shares should be considered as a defensive asset.
Coca-Cola Shares Trading FAQs
Price chart of KO in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.