Framework Convergence
Bull / Bear Assessment
Buffett Signal
Score: 9P / 4F / 2C. Buffett's DEFINITIVE consumer monopoly — but current price cannot deliver 15% annual return.
Durable Competitive Advantage
Consumer Monopoly: YES ✅ — Buffett's textbook example since 1988. "The ideal business." World's most recognized brand. 61.6% gross margins on flavored sugar water = ultimate pricing power.
Initial Rate of Return & CAGR
Does NOT meet 15% threshold on any metric. Strong for mature $350B company but insufficient for Buffett-level compounding.
Income Statement & Balance Sheet
GPM 61.6%: Signature consumer monopoly. Debt: $45.5B ÷ $13.1B NI = 3.5yr (barely passes). ROE 40.7%: Every retained dollar creates $0.40+ new annual earnings.
10-Year Projection
Even optimistic scenario fails 15%. For 15% at 8.2% growth, need to buy at $37.31 — a 54% discount.
Buffett Scorecard
Score: 9 PASS / 4 FAIL / 2 CAUTION — The perfect business at the wrong price.
← Main Page Análisis Graham Buffett Sowell Metodología About
The Coca-Cola Company (KO)
Security Analysis — Benjamin Graham Method
NYSE · Consumer Staples · Beverages — Soft Drinks
⚠️ SPECULATION BY PRICE
Excellent company — but current price far exceeds Graham's investment thresholds
GRAHAM INTRINSIC VALUE THERMOMETER
$42.80 Max Investment
📍 $81.56 — YOU ARE HERE
◄ BARGAIN ► ◄ INVESTMENT ► ◄ SPECULATION ► ◄ OVERVALUED ►
Investment vs. Speculation Classification
Classification: SPECULATION BY PRICE. Coca-Cola is an outstanding business with stable, growing earnings. However, at $81.56, the stock trades at 38.1× its 9-year average earnings — nearly double Graham's absolute maximum of 20×. The TTM P/E of 25.6× also exceeds the investment threshold. The speculative component of the price ($81.56 - $42.80 = $38.76) represents 48% of the current price.
[Sources: stockanalysis.com price data Jul 17, 2026; macrotrends.net EPS history]
Phase Verdict: FAIL — Price exceeds all Graham investment thresholds
Earning Power Analysis (10-Year Record)
Year EPS (Diluted) Net Income ($M) Revenue ($M) Profit Margin
Income Statement Deep Dive
Gross Margin Consistency (5yr): 58.1% → 60.3% → 59.5% → 61.1% → 61.6% — Outstanding stability and improvement. The 60%+ gross margin reflects enormous pricing power from the world's most recognized brand.
Interest Coverage: (Operating Income $13,762M + Interest Income $2,817M) ÷ Interest Expense $1,654M = 10.0×. Graham's minimum for industrials is 3.0×. This exceeds the standard by 233%.
Depreciation ($1,050M): Represents 2.2% of revenue — consistent with an asset-light franchise model (KO sells concentrate, not operates plants).
Non-Recurring Items: FY2024 had $4,163M in "other operating expenses" (vs. $1,261M in 2025), which included impairment charges and fairlife contingent consideration. FY2025 returned to normal levels.
[Source: stockanalysis.com KO income statement, accessed Jul 19, 2026]
Balance Sheet Analysis — Asset Value
Asset Metric Value ($M) Per Share vs. Price
Book Value $32,169 $7.46 Price = 10.9× Book
Net Current Assets (CA - All Liab) -$39,497 -$9.17 Negative
Tangible Book Value $4,147 $0.96 Price = 85× TBV
Goodwill + Intangibles $28,022 $6.50 87% of Book Value
Debt and Financial Structure Analysis
Debt Payoff Test: Total Debt $45.5B ÷ Net Income $13.1B = 3.5 years. This PASSES Graham's 3-4 year test, though barely.
Current Ratio: 1.46 — Below Graham's preferred 2:1 for industrials, though KO's extremely stable cash flows and A+ credit rating mitigate this concern. The company has never faced a liquidity crisis.
Treasury-Stock Adjusted D/E: Total Liabilities $70.5B ÷ (Equity $32.2B + |Treasury Stock| $56.4B) = 0.80 — significantly more reasonable when accounting for capital returned via buybacks.
Debt Structure: Long-term debt ($42.1B) is well-laddered across multiple maturities. Short-term debt ($1.6B) and current portion of LTD ($1.8B) are manageable relative to operating cash flow ($7.4B). No refinancing crisis imminent.
[Source: stockanalysis.com KO balance sheet FY2025, accessed Jul 19, 2026]
Intrinsic Value Calculation
Method 1: Graham Earnings-Based Valuation
Scenario EPS Used Multiplier Value/Share
Conservative (10yr avg, 10×) $1.96 10× $19.55
Normal (9yr adj avg, 12.5×) $2.14 12.5× $26.75
Optimistic (9yr adj avg, 20×) $2.14 20× $42.80
Comparative Analysis
Company P/E Ratio Market Cap Earnings Yield Div Yield
Coca-Cola (KO) 25.6× $350.9B 3.9% 2.6%
PepsiCo (PEP) 16.4× $187.2B 6.1% ~3.5%
Keurig Dr Pepper (KDP) 15.3× $42.1B 6.5% ~2.8%
Monster Beverage (MNST) 44.9× $95.4B 2.2% 0%
Qualitative Factor Assessment
1. Inherent Stability: EXCEPTIONAL. Beverages consumed daily regardless of economic conditions. Asset-light concentrate model. Revenue declined only 11.4% in 2020 pandemic and recovered fully by 2022.
2. Competitive Position: DOMINANT. World's #1 non-alcoholic beverage company. 200+ countries. Consumer monopoly — customers ask for Coke by name. Brand valued at $100B+.
3. Management Quality: PROVEN. Under CEO Quincey (since 2017): consistent organic growth, margin expansion, portfolio diversification into coffee/energy/water.
4. Industry Outlook: NEUTRAL TO FAVORABLE. Global non-alcoholic beverages grow 4-5%. Health trends create headwinds for sugary drinks but KO diversifies successfully.
5. Regulatory Risk: MODERATE. Sugar taxes in multiple jurisdictions. KO has mitigated through reformulation and zero-sugar variants.
Dividend and Shareholder Policy
Consecutive Increases
Annual Dividend (2026)
Dividend King Status: 64 consecutive years of increases (2026 hike from $0.51 to $0.53/quarter). One of the longest records on Wall Street, demonstrating consistent earning power across multiple business cycles.
Payout Ratio: 66.7% of earnings — well covered. Retained 33% reinvested at ROE of 38.5%.
Buybacks: $746M in 2025 (modest). At current 25.6× P/E, buybacks are value-destructive by Graham's standards. KO correctly prioritizes dividends over buybacks.
Special Situations and Warning Signs
Tax Consistency: ETR 17.9% (2025) — stable 17-21% range over 5 years. No red flags.
Goodwill ($15.5B): Declining from $19.4B (2021). No inflation — reflects divestitures.
2024 "Other Operating Expenses" ($4.2B) vs $1.3B (2025): fairlife contingent payment, not recurring.
EPS and Net Income trending in same direction — no buyback masking.
Hidden Value: Brand portfolio (200+ brands) and bottler equity investments ($20.2B) likely exceed book value. Franchise model understates true earning capacity relative to physical assets.
← Main Page Análisis Graham Buffett Sowell Metodología About
The Coca-Cola Company (KO)
SOWELL ECONOMIC FRAMEWORK — Basic Economics (5th Ed.)
NYSE · Consumer Staples · Global Beverages · Jul 19, 2026
VERDICT: ALCISTA (BULLISH) 📈
Price signals are transparent, resources flow efficiently, natural monopoly with continuous innovation, no systemic risk detected
Identification of Critical Scarce Resources
Resource % of Cost Price Trend (5yr) Substitutes Scarcity Risk
Sugar/HFCS ~15% Stable to Rising Artificial sweeteners Low
Aluminum (cans) ~12% Stable PET plastic, glass Low
PET Resin ~8% Declining Aluminum, glass Low
Water ~5% Stable None Medium (regional)
Mapping of Leading Suppliers
Input Key Suppliers Market Structure Price Signals
Sugar/HFCS Cargill, ADM, Bunge, Sudzucker Highly Competitive Transparent (global commodity)
Aluminum Alcoa, Rio Tinto, Novelis, Ball Corp Competitive Oligopoly Transparent (LME priced)
PET Resin Indorama, DAK, Shell, SABIC Competitive Transparent (oil-linked)
Bottling/Distribution CCEP, Coca-Cola Femsa, Arca Continental Franchise (captive) Contracted (multi-year)
Price Signals Analysis — CRITICAL PASS-THROUGH TEST
Output Prices (Revenue)
🔑 PASS-THROUGH TEST RESULT: PASS CONFIRMED — 10-K revenue/COGS data
KO exists in the optimal quadrant: Inputs Stable + Product Prices Rising = Margin Expansion.
From 2021-2025, COGS grew 20% ($15.4B→$18.4B) while revenue grew 24% ($38.7B→$47.9B). Gross margin expanded from 60.3% to 61.6%. The company is CAPTURING value from the supply chain, not losing it.
Why KO can pass costs: ALL beverage competitors face the same sugar, aluminum, and distribution cost pressures. When sugar prices rise, PepsiCo, Keurig, and every local brand faces the same increase — so ALL raise prices. Consumers don't switch because there's no cheaper equivalent with the same brand cachet. CONFIRMED — Q1 2026 organic revenue +10% driven by 2% price/mix
Incentives and Opportunity Cost
Investor's Opportunity Cost:
KO earnings yield: 3.9% vs. 10yr Treasury at 4.55% → Treasury offers higher yield with zero risk
KO total return (dividend + growth): 2.6% + 8.2% = ~10.8% expected vs. S&P 500 historical ~10% → Comparable to index
KO vs. PEP: KO at 25.6× vs PEP at 16.4× → Investor pays 56% premium for KO's brand superiority
Management Incentives: CONFIRMED — 10-K proxy statement
Government Intervention and Distortions
Subsidies & Tax Benefits: KO receives no material direct government subsidies. Its 17.9% effective tax rate (2025) reflects normal corporate tax planning, not special treatment. CONFIRMED — 10-K effective tax rate reconciliation
Tariffs & Protectionism: KO does NOT depend on trade barriers for competitive advantage. In fact, trade barriers HURT KO by limiting market access. The company's dominance comes from brand and distribution efficiency, not protection from imports. CONFIRMED — 10-K Item 1A risk factors cite tariffs as headwind
Sugar Taxes (NEGATIVE DISTORTION): Multiple countries impose sugar taxes (UK, Mexico, France, South Africa, etc.). This is a government price distortion that raises costs for ALL sugary beverages equally. Since ALL competitors face the same tax, KO can pass it through. KO has ALSO adapted by growing its zero-sugar portfolio. CONFIRMED — 10-K discusses excise/sugar taxes in risk factors
Critical Test: Would KO be profitable without ANY government intervention?
ANSWER: ABSOLUTELY YES. KO's profitability comes from 200+ years of brand building and global distribution — pure market-created value. Government intervention (sugar taxes) actually HURTS KO, not helps it. The company succeeds DESPITE government distortions, not because of them. This is the hallmark of a genuinely productive enterprise.
Systemic Risk and Global Interconnectivity
Risk Factor Exposure Severity Evidence
Geographic Concentration ~35% North America, ~65% international (diversified) Low CONFIRMED — 10-K segment reporting
Currency Risk 65% international revenue exposed to FX Medium CONFIRMED — 10-K risk factors
Credit/Debt Dependence $45.5B debt, A+ rated Low CONFIRMED — balance sheet
Supply Chain Disruption 200+ countries, local sourcing Low INFERRED — diversification mitigates
Competition and Market Position — Natural vs. Artificial Monopoly
🔑 NATURAL vs. ARTIFICIAL MONOPOLY TEST:
If all government protection vanished tomorrow, would KO maintain dominance?
ANSWER: YES — NATURAL MONOPOLY (Consumer Monopoly). KO's dominance comes from: 138 years of brand building that no competitor can replicate at any cost
Global distribution infrastructure that took decades to construct
Consumer preference so strong that "Coke" is a generic word for cola in many markets
Scale, Specialization, and Operational Efficiency
Economies of Scale: STILL OPERATING IN POSITIVE TERRITORY CONFIRMED — margins expanding 2021-2025
Gross margin expanded from 58.1% (2022) to 61.6% (2025) — each additional dollar of revenue is MORE profitable, not less. Scale still benefits.
Operating margin expanded from 25.4% to 28.7% over same period.
Asset-light franchise model avoids diseconomies: KO sells concentrate, bottlers handle manufacturing complexity. Decision-making remains centralized for brand/strategy but decentralized for local execution.
Specialization: KO is appropriately specialized in what it does best — brand management, concentrate production, and marketing. Manufacturing complexity is outsourced to specialized bottling partners. This is textbook Sowell-approved specialization: "each participant does what they do most efficiently." INFERRED — organizational structure implies specialization
The Role of Profits, Losses, and Management
Nature of KO's Profits:
Source: From superior efficiency and brand (natural monopoly), NOT from government protection. CONFIRMED — no subsidy dependency identified
Sustainability: Sustainable — protected by brand, scale, and continuous innovation (not temporary tech advantage competitors can copy).
Profit on Investment: ROE of 40.7% — exceptional. Each dollar of equity generates 40.7 cents annually. CONFIRMED — stockanalysis.com
Are extraordinary profits attracting competitors? No — barriers are too high. No new global beverage brand has successfully challenged KO's dominance in 50+ years. The "attraction of competitors" signal applies to tech/low-barrier industries, not 138-year-old consumer franchises.
Sowell Conclusion — Verdict Aggregation
Verdict Tally (Weighted)
Factor Weight Signal Evidence
Pass-Through Test (Phase 3) HEAVY (2×) BULLISH — Can pass costs, margins expanding CONFIRMED
Natural vs Artificial Monopoly (Phase 7) HEAVY (2×) BULLISH — Natural monopoly, market-created CONFIRMED
Profits from Real Demand (Phase 5) HEAVY (2×) BULLISH — No subsidy dependency CONFIRMED