How to trade Coca-Cola shares

How to trade Coca-Cola shares

You can trade Coca-Cola shares with CFDs. It is leveraged which means you only need to put down a small deposit – known as margin – to open your position. You’ll gain the same exposure as if you had committed the full amount of capital to buy the shares outright. It is important to remember that when using leverage, your profit or loss will be based on the full size of the position, not just the margin required to open it.

Learn more about CFDs

When trading with CFDs, you don’t have to take ownership of the physical shares. This means that you can speculate on their price rising (known as going long) or falling (known as going short), enabling you to profit from both upward and downward market movements.

Understanding Coca-Cola: a brief history

John Pemberton was the man who devised the Coca-Cola formula back in 1886, and the rights to the formula were subsequently bought by Asa Griggs Candler in 1888. Candler incorporated The Coca-Cola Company (KO) in 1892, before the company was bought by a group of businessmen led by Ernest Woodruff in 1919 for $25 million.

Later that same year, The Coca-Cola Company carried out its initial public offering (IPO) on the New York Stock Exchange (NYSE) – trading at $40 a share.

Find out more about the history of Coca-Cola

Since going public, Coca-Cola has made a series of high-profile acquisitions and majority-stakes. Some of the most notable of these have been Minute Maid in 1960, Glaceau Vitamin Water in 2007, a 90% stake in Innocent Drinks in 2013, Monster Beverages (MNST) in 2015 and Costa Coffee in 2018.

By diversifying itself away from the carbonated beverages which played a huge role at the start of its history, The Coca-Cola Company has ensured that its market scope is wide and its influence in society is cemented.

Learn more about Coca-Cola’s acquisition of Costa Coffee

Coca-Cola shares: the basics

Coca-Cola Company shares are listed on the NYSE under the ticker KO. As one of the top ten most recognised brands in the world according to Forbes, Coca-Cola is a share that has been in consistently high demand.

Coca-Cola’s share price is largely driven by consumer demand. It is estimated that 1.9 billion servings of Coca-Cola products are consumed per day around the world. Brand loyalty has a large role to play in the demand for Coca-Cola in the markets, chiefly because of the on-going and age-old debate of Coca-Cola vs Pepsi – two of the market’s leading carbonated drinks with similar but distinct flavours.

In terms of demand from investors, Coca-Cola’s dividend payments have gone up yearly, with the company paying 40 cents for every share owned in October 2019. This represented a dividend yield of around 2.93% at the time of writing. Aside from Pepsi (PepsiCo), some of Coca-Cola’s main competitors are Dr Pepper Snapple and Red Bull.

Heightened awareness of the sugar content in drinks, as well as shifting attitudes away from fast foods in favour of healthy and environmentally sustainable alternatives could likely affect the future earnings and popularity of carbonated-beverage companies. However, for the time being, it seems that companies like Coca-Cola can rely on their brand loyalty and recognition to keep profits coming in – as well as a steady and calculated diversification of their products.

Coca-Cola key personnel: who manages the company?

There are 12 people on the senior leadership team of The Coca-Cola Company:

The Coca-Cola Company also has a board of 13 directors that oversees the executive team to ensure the interests of all stakeholders and shareholders are being served:

What is Coca-Cola’s business model?

Coca-Cola’s business model mainly concerned with the sale and distribution of the syrup concentrates it makes. These syrups are turned into Coca-Cola and its other branded soft drinks once they are mixed with carbonated water.

As a result, The Coca-Cola Company reports revenues in two categories: concentrate operations and finished product operations. The concentrate operations at Coca-Cola are concerned with the manufacture and distribution of different syrup concentrates to authorised bottlers and franchisees, who then sell it to customers as the finished products such as Coca-Cola, Fanta and Sprite by adding carbonated water.

Finished product operations are the company-owned bottling operations, which are concerned with the sale and distribution of finished products. This falls under the jurisdiction of the Bottlers Investment Group (BIG) which was created to ensure the long-term success of the franchisees around the world.

BIG operates by temporarily placing certain bottlers under the direct ownership of The Coca-Cola Company and utilising the resources and leadership at its disposal to drive long-term growth.

Coca-Cola fundamental analysis: how to analyse KO

Before you take a position on Coca-Cola shares, it’s important that you carry out fundamental analysis of the company to determine whether Coca-Cola shares are currently overbought or oversold. Fundamental analysis involves looking at the fundamentals of a company, including the senior leadership, its financial statements, its operations and consumer demand.

As well as this, you can use the following three formulas to show you information about a company’s stock price and future earning potential, which can help you to determine whether you wish to open a position.

Coca-Cola’s price-to-earnings ratio

A price-to-earnings (P/E) ratio can be used to assess the value of Coca-Cola stock. This is because the P/E ratio shows how much you would need to spend on Coca-Cola shares to make a $1 profit. If a company has a high P/E ratio compared to its direct competitors (such as PepsiCo and Dr Pepper Snapple), then it could lead investors to believe that the company’s stock is overvalued.

To calculate the P/E ratio, you would need to divide the market value per share by the earnings per share. The earnings per share is calculated by dividing the total company profit by the number of shares it has issued. At the end of September 2019, Coca-Cola’s P/E ratio was 25.43.

Coca-Cola’s relative dividend yield

The dividend yield compares Coca-Cola’s annual dividends to its current share price. The relative dividend yield is a company’s dividend yield compared to the dividend yield of an entire index.

To calculate the relative dividend yield of Coca-Cola stocks, you would first calculate the company’s dividend yield by dividing its annual dividend by the current share price (at the time of writing, this was 2.93%). Next, divide the dividend yield by the average dividend yield for the index on which the stock is listed.

If the result of is relatively low, it might suggest that the company’s shares are currently overvalued when compared to the shares of its competitors.

Coca-Cola’s return on equity

Return on equity (ROE) measures a company’s return on shareholder capital. ROE is expressed as a percentage and it can be calculated by dividing a company’s net income by the total amount of stakeholder equity.

For potential investors or traders, a low ROE could mean that a stock is currently overvalued. This is because the issuing company is not currently generating as much income per dollar of shareholder investment as its competitors.