KDP

Is Wall Street Misjudging Keurig Dr Pepper (KDP) Stock?

Keurig Dr Pepper's fundamentals suggest that it may be overvalued with strong growth indicators, but the 18 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $30.0 to $45.0 per share, for an average of $39.92. At today's price of $34.62, Keurig Dr Pepper is trading -13.26% away from its average target price, suggesting there is an analyst consensus of some upside potential.

Keurig Dr Pepper has a trailing twelve month P/E ratio of 34.28, compared to an average of 22.33 for the Consumer Cyclical sector. Based on its EPS guidance of 1.93, the company has a forward P/E ratio of 17.94.

In contrast, the market is undervaluing Keurig Dr Pepper in terms of its equity because its P/B ratio is 2.158. In comparison, the sector average is 3.12. The company's shares are currently trading 76.39% above their Graham number, implying that they are overvalued in terms of earnings and book value.

If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows. Furthermore, Keurig Dr Pepper has wide margins as you can see in the financial summary below.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $10,500 $11,130 $12,701 $13,190
Revenue Growth n/a 6.0% 14.12% 3.85%
Gross Margins 60.4% 58.27% 54.93% 55.52%
Gross Margins Growth n/a -3.53% -5.73% 1.07%
Operating Margins 22.65% 22.28% 22.79% 19.75%
Operating Margins Growth n/a -1.63% 2.29% -13.34%
Earnings Per Share $0.89 $0.94 $1.51 $1.02
EPS Growth n/a 5.62% 60.64% -32.45%
Diluted Shares (MM) 1,407 1,407 1,418 1,408
Free Cash Flow (MM) $2,109 $1,939 $2,419 $2,458
FCF Growth n/a -8.06% 24.76% 1.61%
Capital Expenditures (MM) $365 $517 $455 $379
Net Debt / EBITDA 5.34 5.83 3.07 4.05

Keurig Dr Pepper Inc. is a beverage company in the United States and internationally. The large-cap Consumer Cyclical company is based in Burlington, MA. Keurig Dr Pepper has offered a 2.24% dividend yield over the last 12 months.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

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