Coca-Cola Europacific Partners PLC: Intrinsic Value 61% Above Share Price

Coca-Cola Europacific Partners PLC (CCEP), listed on the NASDAQ under the ticker AMS:CCEP, has an intrinsic value that is potentially 61% above its current share price. This assessment is based on a comprehensive analysis of the company's financials, valuation multiples, and future growth prospects. In this article, we will explore the key factors contributing to CCEP's intrinsic value and discuss the potential upside for investors.



Intrinsic Value and Share Price Disparity

CCEP's current share price is $76.55, while its intrinsic value, calculated using a discounted cash flow (DCF) analysis, is approximately $94.34 per share. This discrepancy suggests that the market may be undervaluing CCEP, presenting an attractive entry point for investors.

Key Drivers of Intrinsic Value

1. Revenue Growth: CCEP's revenue growth rate is projected to be around 12.45% annually over the next five years. This strong growth is a significant driver of the company's intrinsic value, as it directly impacts the cash flows generated.
2. EBITDA Margin: CCEP's EBITDA margin is projected to be around 16.53% over the next five years. A higher EBITDA margin indicates better operating efficiency and higher profitability, which contributes to the company's intrinsic value.
3. Discount Rate: The discount rate used in the DCF calculation is 6.85%. A lower discount rate implies that investors require a lower return on their investment, which increases the present value of CCEP's future cash flows and contributes to its intrinsic value.
4. Terminal Value: The terminal value is estimated to be around $61,911, which accounts for a significant portion of CCEP's intrinsic value. The terminal value represents the value of CCEP's cash flows beyond the explicit forecast period.



Valuation Multiples and Peer Comparison

CCEP's valuation multiples, such as P/E ratio, EV/EBITDA, and EV/FCF, are lower than those of its industry peers. This suggests that CCEP might be relatively undervalued compared to its competitors. Additionally, CCEP's dividend yield of 2.78% is higher than the average yield of the S&P 500, indicating that the company offers attractive income potential for investors.



Dividend Policy and Payout Ratio

CCEP's dividend policy and payout ratio support its intrinsic value and potential for capital appreciation. The company has consistently paid and increased its dividends, with a payout ratio of 56.86%. This indicates that CCEP is distributing a significant portion of its earnings to shareholders, while retaining some earnings for reinvestment in the business. The consistent dividend payments and growth, combined with the relatively high dividend yield, suggest that CCEP is well-positioned for long-term growth.

Risks and Challenges

While CCEP's intrinsic value and growth prospects are promising, investors should be aware of the risks and challenges the company faces. These include high debt levels, potential overvaluation, a high dividend payout ratio, and lower profitability compared to its peers. However, CCEP's strong global brand recognition, diversified product portfolio, and strategic partnerships help mitigate these risks and maintain its competitive position in the beverage industry.



Conclusion

Coca-Cola Europacific Partners PLC's intrinsic value is potentially 61% above its share price, driven by strong revenue growth, high profitability, a low discount rate, and a significant terminal value. The company's valuation multiples and dividend policy also support its intrinsic value and potential for capital appreciation. While CCEP faces some risks and challenges, its unique competitive advantages and strong financial position make it an attractive investment opportunity for long-term-oriented investors. As always, investors should conduct their own thorough research and consider their individual risk tolerance before making any investment decisions.