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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (88088)	1/8/2001 8:48:38 AM
From: Freedom Fighter	Respond to of 132070

Coka Cola and its PE. I'd like to add my 2 cents on KO. There are several reasons it trades at a premium PE ratio that have little to do with its growth rate. 1. It's business position is probably as secure as any large company in the world. In many countries it is totally dominant. 2. It generates an extremely high return on invested capital - which translates into much more free cash flow than the average company - while still growing faster than the average company over time. 3. It isn't subject to technological change and many of the other business risks that other companies are. I can't say exactly what PE is appropriate for this set of business characteristics. But I am certain it's a very big number compared to the average company. The average PE for KO over the last 35 years or so is very close to 30. During that span it outperformed the market. I believe it's a better company now than it was for much of that 30 years. I wouldn't be buying here for obvious reasons, but this is no lock as a short despite the high price. Wayne