KO is overvalued at current prices relative to DCF fair value; wait for price to drop below model figure to buy.

If you look at the companies in his portfolio today, you will see many businesses with very promising futures such as American Express, Coca-Cola, and Google.

Now let's look at Coca-Cola, and we can see that Coca-Cola is also in the fourth stage, the capital recapitalization stage.

For example, let's perform a discounted cash flow analysis on a company like Coca-Cola, which is one of Buffett's holdings. Let's assume I believe that Coca-Cola's free cash flow will grow by 6% annually over the next ten years.

This means that the fair value of a Coca-Cola stock today is $65.75, which is an accurate and specific figure. What this tells us is that while the stock is trading at around $89 per share, Coca-Cola is overvalued according to my model.

I will simply have to wait for the price of Coca-Cola to drop below what my model shows before it becomes an attractive buying deal.

Buffett adheres exclusively to the right side of the business growth cycle, focusing on companies that repurchase their shares or pay dividends. So, let me show you how this will work on a company that Buffett has owned for years, namely Coca-Cola.

Now, this tool shows me the price-to-earnings ratio that Coca-Cola has traded at over the past five years. What it does is calculate the average of the number so that we can see the "fair value" of Coca-Cola during that time.

Then we place very simple ranges above and below the number to indicate when Coca-Cola is significantly above or below the average valuation at which it has traded. The price-to-earnings ratio works with a company like Coca-Cola because it is clearly in stage four of business growth, and when using this, it becomes very clear when Coca-Cola is cheap or expensive.

The company was clearly cheap in October 2025, and it clearly looked expensive in September 2024. By simply using the company's own trading record, we can get a very clear understanding of when a stock is cheap or expensive.

By mid-2026, Coca-Cola stock will be cheap at around $82 per share, and will start to get expensive at around $91 per share. I really think it's that simple.