Monday, September 26, 2011

S&P's Take On Coca Cola (1)

WALL STREET SMARTS, THE BLOG, IS NOW WALL STREET SMARTS, THE BOOK.  FULLY EDITED AND REVISED WITH NEW MATERIAL ON AMAZON

To start, I need to make an important point.  In no way am I recommending Coca Cola as an investment opportunity or a good stock to buy.  I picked this company because, as I said in the last blog, I suspect that this blog's visitors from around the world have all had a Coke at one time or another.  My can of Diet Coke sits on the desk as I post this.

With that disclaimer out of the way, let's look at the August 27, 2011 Standard & Poors (S&P) report on The Coca Cola Co. (stock symbol - KO).  Hopefully you were able to obtain a copy, which will make it easier to follow my description of the ten page report.  I am going to give only a brief description of each page.  I am not going to review the information in the report in detail.

Page One  The S&P recommendation (5 star - Strong Buy), current price ($68.50 as of Aug. 26th), twelve month target price ($79) and a description of KO's investment type (Large-Cap Growth) are at the top of the page.  The next section gives Key Stock Statistics, such as the stock's 52 week range, trailing twelve months (TTM) earnings per share (EPS) of $5.37, TTM price/earnings (12.8) and additional information which would be of interest to the individual investor.

This page contains a price performance chart going back to 2008, which graphs what KO's stock has done over the last few years.  These statistics are flanked by S&P's Qualitative Risk Assessment, which shows that S&P considers the company relatively stable.  Coke receives a Quantitative Evaluation of A+ and a Relative Strength Rank of strong.   The Highlights of the company and the Investment Rationale/Risk prepared by the analyst, Esther Kwon, CFA, are located beneath the Price Performance Chart.  To the right of this analysis are Revenue and Earnings Data going back to 2006.  The section on Dividend Data for the previous four quarters is just below that.  Quite a bit of information is provided on just this first page of the report.  It would take an investor a lot of time to ferret out this data on his or her own.

Page Two  This page contains the analyst's Business Summary.  Next to this summary is Corporate Information including the company's address, telephone number, Executive Officers, Members of the Board and additional facts about KO.  Coca Cola, like most companies, has an individual listed as the Investor Contact.  When I look at a company's S&P report, I sometimes call that company's investor contact with questions.  I have always found the contact person to be cordial and helpful, willing to answer my questions, subject to securities laws restrictions.  Don't expect to get any insider information.

Page Three  Here is the most sought after information for the fundamental investor.  At the top of the page are S&P's Quantitative Evaluations of the company including its Fair Value Rank and Calculation for KO, the company's Investibility Quotient Percentile, Volatility, Technical Evaluation and Insider Activity.  Next to this section is the Expanded Ratio Analysis which provides the price/sales ratio, the price/EBITDA ratio, the price/pretax income ratio, the price/earnings (P/E) ratio and the average diluted shares outstanding for the years 2007 to 2010.  An investor may consider one or more of these ratios significant in his or her personal investment strategy.  It would take a good deal of time for an individual to determine them with a calculator.

The lower half of page three contains a lot of data titled Company Financials.  This section includes per share data, income statement analysis, balance sheet and other financial figures for the past ten years.  This is a treasure trove of information for the fundamental investor.  The individual investor will find all of the data he or she may need in order to decide if KO might meet the investor's requirements for a good investment.

We will continue our review of S&P's report on The Coca Cola Co. in the next blog.


Comments are always welcome.

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