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Strategies & Market Trends : Value Investing

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To: Graham Osborn who wrote (58567)	11/27/2016 11:12:16 AM
From: bruwin	Read Replies (2) of 78802

"Have you looked at their balance sheet recently?" What is it about KO's Balance Sheet that you don't like ? If it's KO's Long Term Debt, then it is up by about 12% in the last 9 months .... However, when we look at what that Debt is costing KO relative to its EBITDA (where EBITDA is what's largely left over after those two main, unavoidable Expenses, namely CoS and SG&A), we see that "Interest Expense" for the last 12 month period is $628mil. It's 12 months of EBITDA is $11637mil. So that percentage is (628/11637) x 100 = 5.4% of EBITDA is lost to Debt Expense. I wouldn't have thought that's a train smash in terms of Revenue reduction. I'm not sure what you mean by "KO is no longer an equity-bond" Based on a 10 year AAA Corporate Bond Rate ("LTCBR") of about 3% ... ... and based on the last 12 month's numbers, we can calculate KO's "Equity Bond" from :- Pretax Profit per share/LTCBR = (9159/4315)/3% = ~$71/share. KO is currently trading at about $42/share. Seems that KO is currently at a discount to its "Equity Bond" ....

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