Company ProfileÂ (excerpt from Reuters): Coca-Cola European Partners plc (Orange) is an independent Coca-Cola bottler. The Company is formed to act as the holding company for the group to be formed by the combination of White, a company that owns the Coca-Cola bottling operations in Great Britain, continental France, Monaco, Belgium, Luxembourg, the Netherlands, Sweden and Norway; Olive, a company that owns the Coca-Cola bottling operations in Spain, Portugal and Andorra, and Black, a company that owns the Coca-Cola bottling operations in Germany (the Combination). The Company’s segments are Europe and Corporate. White is The Coca-Cola Company (TCCC)’s bottling partner in Western Europe and is an independent Coca-Cola bottler. Olive is TCCCâ€™s bottling partner for Spain, Portugal and Andorra, and operates in these territories under product bottling and distribution agreements with TCCC. Black is an indirect subsidiary of TCCC, and is TCCCâ€™s bottling partner in Germany.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$20,154,999,000||Pass|
|2. Sufficiently Strong Financial Condition||Current Ratio > 2||1.03||Fail|
|3. Earnings Stability||Positive EPS for 10 years prior||Pass|
|4. Dividend Record||Dividend Payments for 10 years prior||Pass|
|5. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||-8.65%||Fail|
|6. Moderate PEmg Ratio||PEmg < 20||21.18||Fail|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||2.49||Pass|
|Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.|
|1. Sufficiently Strong Financial Condition||Current Ratio > 1.5||1.03||Fail|
|2. Sufficiently Strong Financial Condition||Debt to NCA < 1.1||58.58||Fail|
|3. Earnings Stability||Positive EPS for 5 years prior||Pass|
|4. Dividend Record||Currently Pays Dividend||Pass|
|5. Earnings Growth||EPSmg greater than 5 years ago||Fail|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||-2.32%|
|MG Value based on 3% Growth||$28.33|
|MG Value based on 0% Growth||$16.61|
|Market Implied Growth Rate||6.34%|
|% of Intrinsic Value||550.18%|
Coca-Cola European Partners PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.31 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.34% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.
At the time of valuation, further research into Coca-Cola European Partners PLC revealed the company was trading above its Graham Number of $28.43. The company pays a dividend of $0.99 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.18, which was below the industry average of 25.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.27.
Coca-Cola European Partners PLC scores quite poorly in the ModernGraham grading system, with an overall grade of D+.
Stage 3: Information for Further Research
|Net Current Asset Value (NCAV)||-$20.27|
|Number of Consecutive Years of Dividend Growth||1|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2018|
|Total Current Assets||$4,130,703,000|
|Total Current Liabilities||$4,016,030,000|
|Shares Outstanding (Diluted Average)||496,000,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$2.20|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$1.95|
Other ModernGraham posts about the company
|Coca-Cola European Partners PLC Valuation â€“ January 2017 $CCE|
|Coca-Cola Enterprises Inc. Analysis â€“ September 2015 Update $CCE|
|14 Companies in the Spotlight This Week â€“ 4/5/14|
|Coca-Cola Enterprises Inc. (CCE) Annual Valuation â€“ 2014|
Other ModernGraham posts about related companies
The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.