Why is growth important for a stock?
Growth is one of the most important things to look for in stocks that you’re thinking about investing in – even if you just want to buy safe stocks that go up over time and pay dividends.
According to the International Monetary Fund, global GDP is expected to grow 3.2% in 2024 and 3.3% in 2025.
By extension, that means that if a company’s revenues are growing by less than 3% annually, the company is being outpaced by the global economic growth rate. Therefore, the company is shrinking, by comparison, and falling behind.
You should carefully assess the historical and forecasted growth of the stocks you want to buy because revenue growth is one of the most important factors to consider when finding stocks that will grow over time.
When a company can grow revenues, its earnings will naturally increase. Over the long run, a company’s stock price follows its company’s earnings.
In this article, we’ll examine Coca-Cola’s future growth estimates gathered from Wall Street analysts’ consensus estimates.
How accurate are analyst estimates?
Nobody can predict the future, and random things happen all the time that skew projections.
While analysts’ estimates often prove to be slightly inaccurate, they’re a great place to start when making forecasts.
We recommend looking at a stock’s analyst estimates to better understand how a business is projected to grow.
How much has Coca-Cola’s stock price grown?
We measure a company’s stock price growth because, over the long term, stock price growth tends to reflect the business’s performance.
Additionally, a stock that has historically grown at a high rate tends to have strong management and market leadership in its industry.
Coca-Cola has seen a 21.8% price return over the past five years, leading to a weak 4.0% compound annual growth rate (CAGR) over the past 5 years:
Looking at a stock’s price growth is helpful, but using the Total Shareholder Return to find a stock’s past return is more accurate.
The Total Shareholder Return measures the change in stock price over a period of time and also accounts for dividends paid over this period.
Total Shareholder Returns = (Ending Stock Price + Dividends) / Initial Stock Price
Over the past 5 years, Coca-Cola saw an 18.6% price return, with the stock price growing from $53.72/share to $63.73/share. Coca-Cola investors saw a Total Shareholder return of 34.7% over the past 5 years because the stock also paid investors $8.61 in dividends.
That means that investors who held $KO over the past 5 years made a 6.1% compound annual return. Coca-Cola’s share price grew at a 3.5% CAGR, and shareholders made the rest of their return from the company’s dividend.
Generally, we like to see companies delivering over 9% Total Shareholder Returns because that means the stock has delivered an above-market return.
Companies delivering above-market returns tend to have market leadership and investor confidence, which can fuel further price momentum.
Of course, it’s important to remember that past performance doesn’t guarantee future results.
What was Coca-Cola’s sales growth?
We measure a company’s annual sales growth because revenue growth drives earnings, which in turn, drives a higher stock price.
Over the past 5 years, Coca-Cola has had fair revenue growth, seeing a 7.5% revenue CAGR. In the last 12 months, Coca-Cola has had fair revenue growth of 6.4%.
Analysts expect Coca-Cola’s revenue to grow at a Neutral 3.2% compound annual growth rate (CAGR) over the next 5 years.
We prefer to see companies grow revenues at over 8% annually because that means they’re growing faster than the overall market.
Companies growing faster than the market are more likely to have strong competitive positioning, which could lead the stock to deliver above-average returns for investors.
See Coca-Cola’s full analyst estimates >>>
What was Coca-Cola’s earnings growth?
Earnings-per-share is calculated by dividing a company’s net income by its number of outstanding shares. We measure annual EPS growth to determine whether a company is successfully increasing shareholder value.
Over the past 5 years, Coca-Cola has had fair EPS growth, seeing a 5.3% CAGR. Over the last 12 months, Coca-Cola saw fair year-over-year EPS growth of 8.5%.
Analysts expect Coca-Cola’s earnings-per-share to grow at a Fair 6.2% compound annual growth rate (CAGR) over the next 5 years.
Generally, we like to see companies growing earnings-per-share at 10% per year or more because that means the company will drive higher profits and increase shareholder value.
Will Coca-Cola have strong free cash flows?
Free cash flow refers to a company’s Operating Cash Flow minus Capital Expenditures. Free cash flow measures the cash a business generates after accounting for all the cash expenses and investments in buildings and equipment necessary to run the business.
FCF is one of the most popular metrics for investors to track because a company with strong free cash flow generation can generate surplus cash, invest in growth opportunities, pay dividends, and even buy back shares. Strong free cash flow growth is one of the driving factors behind companies that deliver solid returns for shareholders.
Over the last 12 months, Coca-Cola’s FCF growth was 11.2% year over year. Analysts expect strong free cash flow growth to continue, with 9.3% growth next year:
Analysts expect Coca-Cola’s free cash flow to grow at a fair 7.2% compound annual growth rate (CAGR) over the next 5 years.
We like to see companies growing their free cash flow at over 8% annually, as strong FCF growth means a company will drive increasing shareholder value.
How profitable will Coca-Cola be?
Operating margins measure what percentage of revenue remains as operating income after a company pays its operating expenses.
Operating margins are one of the best measures of a company’s profitability because they exclude interest payments and taxes.
This makes it easier to use operating margins to compare companies on an “apples-to-apples” basis.
Coca-Cola’s operating margins have improved over the past few years and were 29.1% for the most recent fiscal year:
Analysts expect Coca-Cola’s operating income to grow at a fair 5.8% CAGR over the next 5 years. Analysts expect operating margins to grow at a 2.5% CAGR over this time and reach 32.9% in 2028.
We generally like to see companies like Coca-Cola that can increase their operating margins over time because this means the company is growing its revenue faster than its expenses.
This is a good sign because it means that Coca-Cola is expected to become more profitable as it grows, which will drive shareholder value.
How much will Coca-Cola pay in dividends?
Dividends are important in evaluating the returns a shareholder will get from owning a stock because dividends are regular cash payments that a company pays to reward its shareholders.
Many investors find dividends important because they can act as a steady income stream for investors.
Additionally, a company that’s growing its dividends is increasing its shareholders’ returns.
Coca-Cola paid $1.87 in dividends in the last 12 months, which means it currently has a 2.9% dividend yield. Analysts expect dividends per share to increase at a 3.9% CAGR over the next two years to $2.02 and a 5.3% CAGR over the next 5 years to $2.42.
We like to see companies increase their dividends annually because that means they increase their shareholder returns.
Final Thoughts:
These are Wall Street’s analysts’ 5-year consensus growth estimates for Coca-Cola:
- Revenue: 3.2% CAGR
- Normalized EPS: +6.2% CAGR
- Free Cash Flow: +7.2% CAGR
- Operating Income: +5.8% CAGR
- Dividends: +5.3% CAGR
See Coca-Cola’s full analyst estimates >>>
Additionally, Coca-Cola has seen a 6.1% compound annual Total Shareholder return over the past 5 years, with 3.5% coming from share price appreciation and the other 2.6% coming from the company’s dividend.
Coca-Cola Stock Growth FAQs:
Is Coca-Cola a good stock to buy right now?
Coca-Cola (KO) remains a stable investment due to its strong brand, consistent dividend payouts, and global market presence. However, potential investors should consider the company’s current valuation and economic conditions, as these factors might affect short-term performance. It’s also essential to evaluate whether KO aligns with your long-term investment goals and risk tolerance.
Where will Coca-Cola stock be in 3 years?
The future of Coca-Cola (KO) stock appears promising due to its robust global brand, diversified product portfolio, and strong dividend history. Over the next 3 years, analysts expect Coca-Cola to see revenue grow at a 5.2% CAGR and EPS grow at a 6.1% CAGR.
What is the future of KO stock?
Over the next five years, analysts expect Coca-Cola to see revenue grow at a slow 3.2% compound annual growth rate. Profits are expected to grow faster, with operating income expected to see a 5.8% CAGR, normalized EPS expected to see a 6.2% CAGR, and free cash flow expected to see a 7.2% CAGR. Long-term investors can most likely expect stable dividends and modest capital appreciation with Coca-Cola over the next 5 years.
Is KO a long-term buy?
Coca-Cola (KO) is considered a solid long-term buy due to its strong brand, consistent dividend payouts, and global market presence. Its diversified product portfolio and strategic adaptations to changing consumer preferences support sustained growth. However, investors should monitor economic conditions and market competition.
What is the dividend growth rate for KO?
KO has a historical dividend growth rate of approximately 3-5% per year. Analysts expect Coca-Cola’s dividends per share to increase at a 3.9% CAGR over the next two years to $2.02 and a 5.3% CAGR over the next 5 years to $2.42. The company has a strong track record of increasing dividends annually, reflecting its commitment to returning value to shareholders.
Who are some of Coca-Cola’s biggest shareholders?
You can see some of Coca-Cola’s biggest shareholders through TIKR’s Ownership tab.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. We aim to provide informative and engaging analysis to help empower individuals to make their own investment decisions. Neither TIKR nor our authors hold any positions in the stocks mentioned in this article. Thank you for reading, and happy investing!
