PEP Stock -- What's In It For Investors?

Today we're going to take a closer look at large-cap Consumer Staples company PepsiCo, whose shares are currently trading at $185.6. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!

The Market May Be Overvaluing PepsiCo's Earnings and Assets:

PepsiCo, Inc. manufactures, markets, distributes, and sells various beverages and convenient foods worldwide. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, PepsiCo has a trailing 12 month P/E ratio of 38.9 and a P/B ratio of 15.01.

PepsiCo's PEG ratio is 3.22, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Growing Revenues With Increasing Reinvestment in the Business:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $67,161 $70,372 $79,474 $86,392
Gross Margins 55.1% 54.8% 53.4% 53.0%
Operating Margins 15.3% 14.3% 14.0% 13.2%
Net Margins 10.89% 10.12% 9.59% 10.31%
Net Income (MM) $7,314 $7,120 $7,618 $8,910
Net Interest Expense (MM) -935 -1,128 -1,863 -939
Net Interest Expense (MM) -$935 -$1,128 -$1,863 -$939
Depreciation & Amort. (MM) -$2,432 -$2,548 -$3,215 -$3,280
Earnings Per Share $5.2 $5.12 $5.49 $4.77
EPS Growth n/a -1.54% 7.23% -13.11%
Diluted Shares (MM) 1,407 1,392 1,389 1,378
Free Cash Flow (MM) $5,417 $6,373 $6,991 $5,604
Capital Expenditures (MM) -$4,232 -$4,240 -$4,625 -$5,207
Net Current Assets (MM) -$46,034 -$56,365 -$54,443 -$53,375
Current Ratio 0.86 0.98 0.83 0.8
Long Term Debt (MM) $29,148 $40,370 $36,026 $35,657
Net Debt / EBITDA 2.1 2.83 2.34 2.3

PepsiCo has growing revenues and increasing reinvestment in the business, a steady stream of strong cash flows, and healthy leverage. However, the firm suffers from slimmer gross margins than its peers and declining EPS growth. Finally, we note that PepsiCo has weak operating margings with a stable trend.

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.