Coca-Cola (KO -0.15%) has been a mainstay in Warren Buffett's Berkshire Hathaway holding company for a long time. The iconic beverage brand is making record highs as it recovers from the coronavirus pandemic a more robust business.

Sales declined for Coca-Cola in 2020 as restaurants, sports stadiums, and movie theaters were forced to shut their doors to in-person visitors. The aforementioned venues are vital sales channels where Coca-Cola's portfolio of beverages is purchased and consumed.

The economic reopening is causing sales from those channels to bounce back and is driving the outperformance of Coca-Cola stock. Indeed, the Warren Buffett favorite is making record highs in 2022. 

KO Chart

KO data by YCharts

Record-high share price fueled by sales and profit growth 

In Coca-Cola's fiscal 2021, which ended Dec. 31, revenue increased by 17% to reach $38.7 billion. Impressively, that was higher than the $37.3 billion it reported in 2019, before the outbreak. I say impressively because operating disruptions caused by the pandemic plagued its most recent fiscal year, and yet it beat sales figures from 2019. Coca-Cola expects the momentum to continue into 2022 and has forecast sales growth of 7.5% at the midpoint.

KO Revenue (Annual) Chart

KO Revenue (Annual) data by YCharts

A meaningful part of its growth was due to Coca-Cola's pricing power. The coronavirus pandemic is causing supply-chain disruptions worldwide. As you may recall from introductory economics, when supply decreases, prices increase. Coca-Cola offset some of the effects of rising inflation by passing higher costs on to consumers. It all helped boost the bottom line; Coca-Cola's earnings per share of $1.68 in 2021 was the highest in the last decade. Like sales, management expects earnings to increase in 2021 as economic reopening progresses in more parts of the world.

The market also liked the steps Coca-Cola has taken to diversify its portfolio away from sugary carbonated beverages. Last November, the company paid $5.6 billion for the remaining 85% stake -- on top of the 15% it already owned -- in Bodyarmor, a sports performance beverage company. The acquisition highlights management's understanding that consumers are looking for healthier options. 

A person holding a bottle of Coke.

Image source: Getty Images.

Coca-Cola stock is getting expensive 

KO Price to Free Cash Flow Chart

KO Price to Free Cash Flow data by YCharts

The rise in the stock price has Coca-Cola trading at price-to-earnings and price-to-free cash flow ratios of 29 and 26, respectively. Beyond the sales recovery fueled by economic reopening, investors cannot expect much sales growth from Coca-Cola. In the last decade, revenue has decreased by a compound annual rate of 1.8%. Admittedly, the growth figures are skewed by acquisition and divestitures. Still, it highlights the company's difficulty in growing revenue organically. 

Investors interested in starting a position are best-served by waiting for a pullback in the stock price. Similarly, investors can feel better about adding shares if the stock price remains flat and the company delivers improved earnings and free cash flow. That said, don't be surprised if the stock keeps making record highs in the near term.