One of Warren Buffett’s largest and longest-held investments is Coca-Cola (KO 0.77%)For some investors, knowing that Berkshire-Hathaway (BRK.A 0.91%) (BRK.B 0.83%) owning a stock is reason enough to buy it. But there’s a big caveat here, because Buffett has owned Coca-Cola for a long time. So the question today is whether the beverage giant can make you a millionaire from this point forward, not how well it’s performed for Buffett’s Berkshire Hathaway. You should pay attention to what you’re paying.

Coca-Cola needs no introduction

The Coca-Cola name is one of the most recognizable and popular consumer goods brands in the world. The company’s namesake soda is sold in both developed and emerging markets, supported by an incredible distribution system and the company’s impressive marketing team. But Coca-Cola is more than just the namesake brand.

The company operates in several beverage categories, including coffee, tea, sports drinks and orange juice. And given its massive size—the company’s market capitalization is a whopping $290 billion—it has the muscle to buy smaller, up-and-coming brands to expand its product line. In short, Coca-Cola is a well-run company, which is why the stock has been a core holding of Berkshire Hathaway for decades.

Still, there’s a slight problem here when looking at Coca-Cola today, highlighted by the fact that Buffett’s Berkshire Hathaway has owned it for decades. As the chart below shows, Coca-Cola stock has risen dramatically over the years. Sure, it’s been a strong performer for Berkshire Hathaway and everyone else who bought it long ago, but is it a good buy today?

KO data from YCharts

Coca-Cola is not cheap

Buffett was trained by the famous value investor Benjamin Graham. To paraphrase one of Graham’s most important sayings, even a good company can be a bad investment if you pay too much for it. Just because Coca-Cola was a big success for Buffett says little about whether it’s a good investment for you and might help you become a millionaire. Here you have to consider today’s valuation.

Right now, Coca-Cola looks anything but cheap. Its price-to-sales ratio, price-to-earnings ratio, and price-to-book ratio are all above their five-year averages. Its dividend yield is near its lowest level in the last decade. Unfortunately, right now, Coca-Cola looks like it’s overpriced.

KO dividend yield data from YCharts

However, Coca-Cola has experienced a number of major declines in its history. As the chart below shows, declines of 20% to 50% are not uncommon. If you like the stock, you may want to keep it on your watchlist just in case there is a major sell-off that results in a lower valuation and gives you a better chance of higher long-term returns. Still, there are two things to keep in mind.

KO data from YCharts

This chart shows market-driven declines, such as those that occurred during the COVID pandemic and the Great Recession. These types of declines tend to be shorter, but require buying when the market is in the midst of a nosedive. And then there are longer-term declines in Coca-Cola stock, when shares are more affected by company-specific issues. Buying during a period of business weakness also requires a contrarian mindset, just of a different kind. The key is to focus on the strength of the brands and businesses that Coca-Cola owns.

Be prepared or you will miss something

Coca-Cola looks expensive today. From this price level, it will be harder to become a millionaire with this stock. However, if you are patient, there is probably a more attractive entry point somewhere – but you will need to have nerves of steel to be able to buy Coca-Cola shares when others are selling.

So don’t just put Coca-Cola on your watch list and let it sit. Really get to know the company and plan to initiate a position when it’s cheaper – perhaps on a 20% decline, with plans to buy more if shares fall even further. If you don’t prepare in advance, you may find in hindsight that you missed the chance to get into a great company when it was temporarily out of favor.