Coca-Cola's P/E, earnings, and margin
KO — P/E Ratio, Trailing EPS, Net Margin. Open KO on the Ledge to see current values.
Earnings quality across four businesses
| Company | Earnings Quality | Why |
|---|---|---|
| Coca-Cola | Very high | Same products, same customers, year after year. Predictable. |
| Apple | High | Strong ecosystem, recurring services revenue, loyal base. |
| Airline | Low | Cyclical, fuel costs volatile, price wars, pandemics. |
| Biotech startup | Very low | Binary outcomes: FDA approval or zero revenue. |
Why predictable earnings earn a premium
This is why Coca-Cola trades at a premium P/E despite growing slowly. Investors pay extra for predictability and sleep-at-night quality.
How earnings quality shapes the P/E
Typical P/E ratios reflecting earnings quality (approximate)
Source: Illustrative point estimates; check current quotes for exact values.
Compare a steady and a cyclical P/E
Compare the P/E of KO (Coca-Cola) to an airline like DAL (Delta). The difference reflects the market's assessment of earnings quality.
Always ask how predictable the earnings are
Which earnings deserve the multiple?
Company A: consistent cash-conversion (OCF/NI = 95%), stable margins. Company B: one-time gains boost reported earnings, OCF/NI = 60%. Both at P/E 20x. Which deserves the multiple?
Check your understanding
Sit with the ideas.
Company A earns $3.00 per share every year like clockwork, growing 5% annually. Company B earned $5.00 last year but has ranged from -$1.00 to $8.00 over the past decade. Which likely trades at a higher P/E multiple, and why?
Why: