Coca-Cola FEMSA Stock May Be 40% Undervalued, DCF Model Suggests

Coca-Cola FEMSA, the Mexican bottler of Coca-Cola products, may be undervalued by as much as 40.3% according to a Discounted Cash Flow (DCF) model.

The company has delivered strong returns over the last five years, returning 142.3%, but some investors are questioning whether the recent share price of $113.24 already captures the long-term story.

Coca-Cola FEMSA's position in the Coca-Cola bottling system can support expectations for steady cash generation, while any pressure on consumer demand or input costs may weigh on future cash flows that underpin valuation.

The DCF model uses projected cash generation to estimate what the stock could be worth today. Over the last 12 months, the company produced roughly MX$18.9 billion in free cash flow, and the model assumes this cash flow continues to grow over time rather than contract.

This approach points to an intrinsic value of about $190 per share compared with the recent share price of $113.24. The gap implies the stock trades at a wide discount to the cash flows used in the model, even after a strong run over the past five years.