Coke has an average, historic return on equity of 32%. Minus out the dividend distribution of 3% and you wind up with a true return on equity of 29.4%. With just over 2 billion shares outstanding, this means that each shareholder has approximately $13.36 equity in the company. Projecting this forward ten years gives us a future per share equity value of $176.14. Through additional calculations we can determine that the company's per share future 2020 trading price will be $1,305. Given the company's current price of $65.12, this means Coke should realize an approximate 35% rate of return over the next 10 years.
We can also use the company's historic earnings per share growth rate and P/E ratio to determine an additional future trading value and rate of return of $407 and 20% respectively. This means that, averaging both methods, the stock will trade at approximately $856 (compared to $65.12 today) and will realize a 27.54% rate of return by 2020.
Wouldn't an ice cold Coke stock taste delicious and refreshing today? The calculations are below ... click to enlarge.
Don't take my word for it. These are the same calculations Warren Buffett uses to make his buying decisions.
Posts
No comments:
Post a Comment