Through all of the current turmoil Coca-Cola’s business and share price have been doing just fine.
Fast Track results: Coca-Cola (KO) failed 2 of the 8 categories, and is a potential idea that’s worth the time to thoroughly research.
Key points:
- Coca-Cola generates lots of cash. The company delivered free cash flow of $5.5 billion in 2007, up from $4.6 billion the year before. Although down $203 million in the first six months of this year, free cash flow was still strong at $2.3 billion.
- Cash is growing on the balance sheet. Cash and marketable securities totaled $6.9 billion at the end of the second quarter, an increase of $2.5 billion from year-end 2007.
- Coca-Cola is conservatively capitalized with long-term debt as a percentage of total capital of only 11.0%.
- Earnings per share surprised on the upside for the last four quarters, and Street estimates have been stable. Second quarter earnings came in at $1.01, for an 18.8% gain. Worldwide unit case volume grew 3%, with international up 5% and North America flat despite a difficult economy.
- Warren Buffett’s Berkshire Hathaway owns 8.6% of Coca-Cola’s outstanding shares.
The Company Stock Risk Profile Fast Track is a research tool for quickly and easily screening stocks for potential ideas. Fast Track is comprised of 10 key categories incorporating fundamentals, valuation and how management and the Street feel about the stock. I like to see a stock fail no more than 3 categories before putting the stock through the complete 50-category Company Stock Risk Profile research process. Most important, whatever screening tool you choose to use, always thoroughly research the stocks that pass your screen before buying.
