The stock of Coca-Cola Femsa SAB de CV (NYSE:KOF, 30-year Financials) shows every sign of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $46.55 per share and the market cap of $9.8 billion, Coca-Cola Femsa SAB de CV stock is estimated to be fairly valued. GF Value for Coca-Cola Femsa SAB de CV is shown in the chart below.
Because Coca-Cola Femsa SAB de CV is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 2.6% over the past three years and is estimated to grow 0.70% annually over the next three to five years.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Coca-Cola Femsa SAB de CV has a cash-to-debt ratio of 0.49, which is in the middle range of the companies in the industry of Beverages - Non-Alcoholic. GuruFocus ranks the overall financial strength of Coca-Cola Femsa SAB de CV at 5 out of 10, which indicates that the financial strength of Coca-Cola Femsa SAB de CV is fair. This is the debt and cash of Coca-Cola Femsa SAB de CV over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Coca-Cola Femsa SAB de CV has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $8.6 billion and earnings of $1.344 a share. Its operating margin is 14.17%, which ranks better than 73% of the companies in the industry of Beverages - Non-Alcoholic. Overall, the profitability of Coca-Cola Femsa SAB de CV is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of Coca-Cola Femsa SAB de CV over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Coca-Cola Femsa SAB de CV is 2.6%, which ranks in the middle range of the companies in the industry of Beverages - Non-Alcoholic. The 3-year average EBITDA growth rate is 7.1%, which ranks in the middle range of the companies in the industry of Beverages - Non-Alcoholic.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Coca-Cola Femsa SAB de CV's ROIC was 7.57, while its WACC came in at 9.95. The historical ROIC vs WACC comparison of Coca-Cola Femsa SAB de CV is shown below:
In summary, the stock of Coca-Cola Femsa SAB de CV (NYSE:KOF, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks in the middle range of the companies in the industry of Beverages - Non-Alcoholic. To learn more about Coca-Cola Femsa SAB de CV stock, you can check out its 30-year Financials here.
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