How an analyst writes up a company: Coca-Cola

The Coca-Cola Company (KO) · Business review · Data: FY2025 Form 10-K

Price (late June 2025)	about 70
Shares outstanding	4,302 million
Market value	about 301 billion
Net debt	about 30 billion
Enterprise value	about 331 billion

Summary. Coca-Cola mainly sells concentrate to independent bottlers, which makes it one of the most profitable large consumer companies in the world: an operating margin of 28.7% in 2025 and a return on capital of roughly 18%. Growth comes mostly from price and mix rather than volume. Free cash flow of roughly 10–11 billion a year, after stripping out two one-off payments, pays a dividend that takes over 80% of it. At about 70 a share, the market is paying around 23 times 2025 earnings, more than PepsiCo or Keurig Dr Pepper, and the price sits at the top of our cash-flow valuation range: at an 8% discount rate it implies cash-flow growth of about 12% a year for five years. The business is strong; the open question is what the price assumes.

How it's built. The summary is written last but read first: most readers stop there. It gives the conclusion, the two or three reasons, and the main tension, in five sentences. The data box lets a reader check the scale in seconds. Graduate mistake: starting with the company's history. Nobody needs the 1886 founding story; they need the answer.

Coca-Cola runs two kinds of business. Concentrate operations sell beverage bases and syrups to bottlers, which add water and sweeteners, package and distribute the drinks: 59% of revenue and 85% of unit case volume in 2025. Finished product operations, mainly company-owned bottlers, sell finished drinks: 41% of revenue but only 15% of volume, at lower margins. The system sold 33.8 billion unit cases in 2025; 84% of volume and 60% of revenue (28.8 billion) came from outside the US. Sparkling soft drinks are 69% of volume and Trademark Coca-Cola alone is 47%.

How it's built. Answer "who pays whom for what?" before any number. Here the key fact is that Coca-Cola mostly does not make or deliver the drinks: bottlers do. That one sentence explains the high margins, the low capital spending, and why the company keeps selling ("refranchising") its own bottlers. All figures are from Item 1 and the MD&A of the 10-K. Graduate mistake: listing brands instead of explaining how money moves.

The non-alcoholic drinks market is mature in rich countries and still growing in emerging ones. Coca-Cola's main global rival is PepsiCo, which also sells snacks; regional rivals and private labels compete on price. Buyers (large retailers) are powerful, but the brand gives Coca-Cola pricing power: in 2025 price and mix added 4% to revenue while volume added 1%. Threats come from changing tastes (less sugar), health taxes and packaging rules, which the report lists among its risk factors.

How it's built. A short, structured view of the forces on the industry: rivals, buyers, suppliers, substitutes, new entrants. Write only what matters for this company, with evidence. "Pricing power" is a claim, so the memo backs it with the 4% price-and-mix figure. Graduate mistake: filling a five-forces table with generic sentences that would fit any company.

2025 vs 2024	Effect on revenue
Volume	+1%
Price, product and geographic mix	+4%
Currency	−2%
Acquisitions and divestitures	−1%
Total	+2% (47,941 million)

From 2016 to 2025 revenue went from 41.9 billion to 47.9 billion, only about 1.5% a year, because the company sold most of its bottlers. From 2020 to 2025, after that was largely done, it grew about 7.7% a year.

How it's built. Break growth into volume, price and mix, currency and structure: the 10-K gives this table in the MD&A. Professionals always separate "selling more" from "charging more" and from "the exchange rate". The ten-year figure needs a sentence of context, or a reader will think the business shrank. Graduate mistake: quoting total growth without asking where it came from.

Year	Operating margin
2016	20.7%
2018	26.7%
2020	27.3%
2022	25.4%
2024	21.2%
2025	28.7%

Gross margin is about 62%. The dip in 2024 came from 4.2 billion of other operating charges: mainly a 3.1 billion non-cash increase in what Coca-Cola owed the former owners of the fairlife milk business, plus 0.9 billion of trademark impairments. 2025 includes 1.26 billion of other operating charges, mainly trademark impairments. Return on invested capital in 2025 was about 18%: operating income after tax at the 17.9% effective rate, divided by invested capital of about 64 billion (equity plus debt, less cash and short-term investments, at the year end), or about 19% before those charges. It is understated a little, because about 20 billion of stakes in bottlers sits in the capital while their income does not count in operating income.

How it's built. Show margins over time, not one year, and explain every jump. Return on invested capital asks: for every dollar the company uses, how much does it earn? Write the formula down in a footnote, because analysts define it differently. Graduate mistake: comparing a margin that includes one-off charges with one that doesn't.

Billion	2023	2024	2025
Op. cash	11.6	6.8	7.4
Capex	1.9	2.1	2.1
FCF	9.7	4.7	5.3
One-offs	–	6.0	6.1
Adj. FCF	9.7	10.7	11.4

FCF is free cash flow: operating cash flow minus capital spending (capex). Exact figures in millions: operating cash 11,599, 6,805 and 7,408; capex 1,852, 2,064 and 2,112. The one-offs are the IRS tax deposit in 2024 and the fairlife payment in 2025.

Dividends paid in 2025 were 8,779 million, about 83% of the three-year average of adjusted free cash flow (about 10.6 billion). Buybacks were 746 million. Debt totals about 45.5 billion against 15.8 billion of cash, short-term investments and marketable securities: net debt of about 30 billion, about 2.0 times operating profit before depreciation. Operating income covers interest about 8.3 times.

How it's built. Profit is an opinion; cash is a fact. Start from cash from operations, subtract capital spending, then find and label anything unusual: here a 6.0 billion tax deposit paid to the IRS in 2024 (part of a tax dispute the report describes) and 6.1 billion of the fairlife payment in 2025. Show both the reported and the adjusted figures, never just the flattering one, and say which cash you net against debt (here cash plus short-term investments and marketable securities). Graduate mistake: using reported 2025 free cash flow (5.3 billion) and concluding the dividend isn't covered, or quietly adjusting without saying so.

Are profits backed by real sales and cash? Three checks:

- Cash against profit. Over 2023–2025, adjusted free cash flow (about 31.9 billion) was close to net income (34.5 billion) once the two one-off payments are added back: profits are largely turning into cash. - What bottlers buy against what consumers drink. Coca-Cola books revenue when it ships concentrate to bottlers, but demand is shown by unit case volume, the drinks bottlers sell on. In 2025 worldwide concentrate sales volume grew 1% while unit case volume was flat. The report explains only the Latin America difference (shipment timing), and that one runs the other way; it gives no reason for the worldwide gap. A small gap in one year proves nothing, but a gap that keeps widening would mean bottlers' stocks are building up. - History. This is not a theoretical risk for this company. In 2005 Coca-Cola settled an SEC case, without admitting or denying the findings, over "gallon pushing" in Japan in 1997–1999: bottlers were offered extended credit to buy concentrate earlier, which the SEC found made the difference between meeting and missing analysts' forecasts in 8 of 12 quarters.

How it's built. Analysts ask whether earnings are sustainable and backed by cash, not just whether they are high. Compare cash flow with profit over several years; compare what the company sells into its channel (shipments) with what end customers buy (here, unit cases); read the notes for changes in accounting or one-offs. Formal tools such as accrual ratios or the Beneish M-score exist, but the habit matters more than the formula. Graduate mistake: taking reported earnings at face value because the company is famous.

Multiples (2025 earnings per share; prices from each company's report cover, 13–30 June 2025; approximate):

Company	P/E	Operating margin
Coca-Cola	about 23	28.7%
PepsiCo	about 22	12.2%
Keurig Dr Pepper	about 22	21.5%

Discounted cash flow. Starting from adjusted free cash flow of about 2.47 a share, growing 5% a year for five years, then at a steady rate:

Value per share; columns are the steady growth rate after year five.

Discount rate	2%	2.5%	3%
7%	58	63	70
8%	48	51	56
9%	41	43	46

On these assumptions the value is roughly 41 to 70 a share, with a central case near 51. A price of 70 requires the most optimistic corner (7% and 3%), or growth of about 12% a year for five years at 8%. The premium to peers reflects much higher margins, but the cash-flow valuation suggests the price already assumes a lot.

How it's built. Use at least two methods and show the assumptions as a table, because the answer depends on them more than on the arithmetic. The discount rate is a judgement about the return investors require; small changes move the value a lot, which is why professionals show a range, not a single number. Peer multiples are a cross-check, not a valuation on their own. Graduate mistakes: a single-point "target price" with no sensitivity; growth assumptions above anything the company has achieved; mixing dates and accounting bases without saying so (the peer prices here are approximate and from mid-2025).

Risks (from the 10-K's risk factors and our analysis): shifting tastes and health rules on sugar; currency, with 60% of revenue outside the US; dependence on independent bottlers; the IRS dispute, where the report estimates about 14 billion of potential further tax and interest for 2010–2025, on top of the 6.0 billion already deposited; packaging and environmental rules.

What would change the view: cash flow growing faster than our 5% assumption; volume growth returning alongside price; lower debt; resolution of the tax dispute; a change in the price relative to cash flow.

Sources: The Coca-Cola Company, Form 10-K for 2025 (filed 20 February 2026): Item 1, Item 1A, Item 7 (MD&A) and the financial statements; SEC company facts data for 2016–2025; PepsiCo and Keurig Dr Pepper Forms 10-K for 2025; SEC press release 2005-58 (April 2005) on the Japanese "gallon pushing" case.

How it's built. Risks should be specific and ranked, not a copy of the 10-K's 20 pages of legal warnings. "What would change the view" shows you have thought about being wrong, which managers value more than confidence. Every figure in the memo traces to a source line. Graduate mistake: a risk list so long nobody can tell what matters.

Each slide has an action title: a full sentence stating the point, so someone reading only the titles gets the argument. Each has one exhibit and a source line.

1. Coca-Cola: a highly profitable brand owner whose price implies strong growth. Exhibit: the data box and three-point summary.
2. It mostly sells concentrate; bottlers do the heavy lifting. Exhibit: revenue and volume split, concentrate vs finished product (59/41 and 85/15).
3. 84% of volume is outside the US. Exhibit: volume by region and the sparkling share. Source: 10-K, Item 1.
4. Growth comes from price, not volume. Exhibit: the 2025 revenue bridge (+1 volume, +4 price/mix, −2 currency, −1 structure).
5. Margins near 29%, more than double PepsiCo's. Exhibit: operating margin 2016–2025, with the 2024 and 2025 charges labelled.
6. About 18% return on capital. Exhibit: the calculation, shown step by step.
7. Strip out two one-offs and free cash flow is steady at 10–11 billion, close to profit. Exhibit: reported vs adjusted free cash flow, 2023–2025.
8. The dividend takes over 80% of free cash flow. Exhibit: free cash flow vs dividends and buybacks; net debt and interest cover.
9. At 70, the price sits at the top of our valuation range. Exhibit: the discount-rate table, with the current price marked.
10. Risks and what would change our view. Exhibit: four ranked risks and four triggers.

The five-minute version uses slides 1, 2, 4, 7 and 9: what it is, how it makes money, where growth comes from, the cash, and the price.

The likely questions, with answers ready:

• "Why is free cash flow so low in 2024 and 2025?" Two one-off payments, the IRS deposit and the fairlife milestone; excluding them it was about 10.7 and 11.4 billion.
• "Isn't 8% too high a discount rate for a company this stable?" Possibly; at 7% the range rises to 58–70. That is why we show the table rather than one number.
• "Could earnings be flattered by shipping concentrate ahead of demand?" We checked: in 2025 shipments grew 1% against flat unit cases. The report doesn't explain the worldwide gap, so we'll watch whether it persists, given the 1997–1999 history.
• "Why does it trade above PepsiCo?" Higher margins and returns from the concentrate model; whether the premium is enough or too much is the valuation question.

How it's built. Write the action titles first and read them alone: if they don't tell the story, the deck isn't ready. One message per slide; charts labelled in plain words; a source on every slide; numbers rounded to what matters. Rehearse the five-minute version, because meetings run short. Graduate mistakes: titles like "Revenue" that say nothing; slides crammed with text read aloud; no answer ready for the obvious question.

• Know the purpose and the audience. A portfolio manager wants the conclusion and the risks; a credit analyst wants the debt and the cash. Start with what they need to decide.
• Three key points, no more. Here: how it makes money, whether the cash is real, and what the price assumes.
• Talk, don't read. Slides carry the evidence in large type; you carry the argument. Look at the room, pause after each key number, and keep to time.
• Rehearse the questions. The answers above are prepared before the meeting, not invented in it. If you don't know, say so and say when you'll come back.

How it's built. Presentation is a skill assessed at work as much as the analysis itself: managers judge whether they can put you in front of a client. Practise the five-minute version aloud, with a timer, at least twice.

PepsiCo (PEP) · 2025 · Data: Form 10-K for the 52 weeks to 27 December 2025

A weaker year: the dividend is still covered by free cash flow, but only just, and debt rose to pay for acquisitions. Net revenue grew 2.3% to 93.9 billion, but operating profit fell 11% (from 12.9 to 11.5 billion, a margin of 12.2% against 14.0%): the MD&A puts it down to impairment charges on the Rockstar energy-drink brand, higher operating and commodity costs, and lower volumes, partly offset by pricing and savings. Net income fell 14% to 8.2 billion. Free cash flow on the company's own definition (operating cash 12.1 billion, less 4.4 billion of capital spending, plus 0.5 billion of asset sales) rose 9% to 8.2 billion; the dividend (7.6 billion) took about 93% of it, and with 1.0 billion of buybacks payouts slightly exceeded it. Long-term debt rose from 37.2 to 42.3 billion, mainly to fund 3.4 billion of acquisitions and investments (against 0.3 billion in 2024). Whether the dividend stays covered depends on margins recovering once the impairment and cost pressures pass; another year of payouts above free cash flow, or debt rising without acquisitions to explain it, would change this view.

How it's built, and what a reviewer would check. The same sequence as the Coca-Cola memo: what happened (revenue, then profit, with the company's own explanation from the MD&A), then cash, then the question asked. The writer found the impairment without being told, by asking why profit fell faster than revenue, and compared payouts with free cash flow rather than with profit. A reviewer would flag: quoting "free cash flow" without saying it's the company's non-GAAP measure; calling the dividend "unsafe" from one year; leaving out the rise in debt, or ignoring the acquisitions it paid for.