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Reverse DCF · KO

What KO's Stock Price Is Really Betting On

The short answer

At today's price, Coca-Cola's stock is pricing in about 13.3% annual free-cash-flow growth for the next ten years. Over the past five years, revenue grew 5.5% a year and operating income 7.5% a year — and even the company's own 2026 profit guidance tops out at just 5-6%.

The conclusion

At its current price, KO implies ~13.3% annual FCF growth for the next 10 years, discounted at 9% (using the company's own adjusted FCF figure).

Coca-Cola's actual 5-year revenue growth has averaged 5.5% a year, and operating income 7.5% a year.

Verdict: the market is pricing in far more than history — or even the company's own guidance — suggests A required growth rate more than double the five-year revenue pace, and well above the company's own 5-6% 2026 profit guidance, is a real gap. This price only makes sense with sustained acceleration well beyond anything Coca-Cola has recently delivered or projected.

Required growth vs. historical growth

Market's ask (adjusted FCF base, WACC 9%)
13.3%
5-yr revenue CAGR
5.5%
5-yr operating income CAGR
7.5%
2026 EPS guidance (reference)
5.5%

Required growth from the reverse DCF below. Historical CAGRs from 10-K FY2021 and FY2025 income statements. 2026 EPS guidance from the Q4 FY2025 earnings call (CFO John Murphy, Feb 2026).

Sensitivity: what if the discount rate or FCF base moves?

Required 10-year FCF growth by discount rate (WACC)
WACCRequired growth (adjusted FCF)Required growth (GAAP FCF)
8%10.82%20.83%
9% (base case)13.31%23.62%
10%15.58%26.17%
12%19.71%30.80%

Even at the lowest discount rate tested (8%), the required growth rate using adjusted FCF is 10.82% — still nearly double the 5.5% five-year revenue pace.

What would move this number

  • The choice of FCF base changes the answer dramatically. Coca-Cola experienced two large one-time cash outflows in recent years — an IRS tax escrow deposit and a fairlife acquisition milestone payment. Using the company's own "adjusted FCF" ($11.4B in 2025, excluding those items) gives a required growth rate of 13.3%; using the raw GAAP cash flow statement figure ($5.3B) instead pushes the required rate to 23.6%. Either way, the market's expectation sits well above historical performance.
  • Lowering the terminal growth rate from 2.5% to a more conservative 2.0% raises the required growth rate slightly.
  • Share count and net debt figures used here are year-end 2025 — any 2026 buybacks or new borrowing could shift the current numbers modestly.

Show your work

Inputs, sources, model assumptions, and the calculation
  • Share price$86.98 — stockanalysis.com, Aug 17, 2026 close
  • Diluted shares outstanding4,313M — 10-K FY2025 income statement, "Average Shares Outstanding — Diluted"
  • Market cap$375,145M — price × diluted shares (calculated)
  • Total debt$45,492M — 10-K FY2025 balance sheet (year-end 2025)
  • Cash + short-term investments$13,872M — 10-K FY2025 balance sheet
  • Net debt$31,620M — calculated
  • Enterprise value$406,765M — market cap + net debt
  • Base FCF (adjusted, 2025)$11,400M — CFO John Murphy, Q4 FY2025 earnings call (Feb 2026): "free cash flow, excluding the fairlife contingent consideration payment, was $11.4 billion in 2025"
  • Base FCF (GAAP, 2025)$5,296M — 10-K FY2025 cash flow statement: operating cash flow $7,408M minus capex $2,112M
  • Discount rate (WACC)9% base case (8%/10%/12% tested)
  • Terminal growth rate2.5% — long-run GDP-level assumption

Normalization note: the company itself has stated that 2024-2025 GAAP operating cash flow was distorted by one-time items (IRS tax escrow, fairlife acquisition milestone payment). This card uses the company's own officially disclosed "adjusted FCF" ($11.4B) as the base case, with the raw GAAP figure shown separately for comparison.

Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's enterprise value.

Historical CAGR: 5-year revenue CAGR = ($47,941M / $38,655M)^(1/4) − 1 = 5.53%. 5-year operating income CAGR = ($13,762M / $10,308M)^(1/4) − 1 = 7.49% (both 10-K FY2025 and FY2021 income statements, FY2021-FY2025).

The fine print

This number is a starting point, not an answer
  • Change the discount rate, the FCF base, the projection window, or the terminal growth rate, and the answer moves significantly — as the table above shows, the GAAP-FCF-based required rate nearly doubles the adjusted-FCF-based one.
  • A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
  • Whether 13.3% growth is realistic should be checked against recent results (Q2 FY2026's organic growth rebound), the new CEO's strategy, and dividend/buyback policy — not against this math alone.
  • Any investment decision, and its outcome, is your own responsibility.
Built from Coca-Cola's 10-K filings (FY2021, FY2025) and a web search for the current share price (stockanalysis.com, Aug 17, 2026). This tells you where to dig deeper — it is not a buy or sell signal.

Frequently asked questions

What growth rate does KO's stock price assume?

At today's price, Coca-Cola's stock is pricing in about 13.3% annual free-cash-flow growth for the next ten years.

How does that compare to Coca-Cola's actual growth and guidance?

Over the past five years, revenue grew 5.5% a year and operating income 7.5% a year — and even Coca-Cola's own 2026 profit guidance tops out at just 5–6%, well below the ~13.3% the current price requires.

What share price was used for this analysis?

This analysis used $86.98, as of Aug 17, 2026.