How Smart Investors Look at PepsiCo (PEP).

PepsiCo logged a -1.5% change during today's evening session, and is now trading at a price of $187.46 per share.

PepsiCo returned gains of 755.0% last year, with its stock price reaching a high of $196.88 and a low of $160.98. Over the same period, the stock underperformed the S&P 500 index by -371.0%. As of April 2023, the company's 50-day average price was $185.7. PepsiCo, Inc. manufactures, markets, distributes, and sells various beverages and convenient foods worldwide. Based in Purchase, NY, the large-cap Consumer Staples company has 315,000 full time employees. PepsiCo has offered a 2.5% dividend yield over the last 12 months.

A Steady Stream of Strong Cash Flows With a Flat Trend:

2020-02-13 2021-02-11 2022-02-10 2023-02-09
Revenue (MM) $67,161 $70,372 $79,474 $86,392
Gross Margins 55.1% 54.8% 53.4% 53.0%
Operating Margins 15.3% 14.4% 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
Depreciation & Amort. (MM) -$2,432 -$2,548 -$2,710 -$2,763
Earnings Per Share $5.2 $5.11 $5.48 $5.72
EPS Growth n/a -1.73% 7.24% 4.38%
Diluted Shares (MM) 1,407 1,392 1,389 1,377
Free Cash Flow (MM) $9,479 $10,558 $11,450 $10,560
Capital Expenditures (MM) $170 $55 $166 $251
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 3.05 4.04 3.46 3.13

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

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

PepsiCo has a trailing twelve month P/E ratio of 32.5, compared to an average of 24.36 for the Consumer Staples sector. Based on its EPS guidance of $7.35, the company has a forward P/E ratio of 25.3. The 7.2% compound average growth rate of PepsiCo's historical and projected earnings per share yields a PEG ratio of 4.53. This suggests that these shares are overvalued. Furthermore, PepsiCo is likely overvalued compared to the book value of its equity, since its P/B ratio of 14.6 is higher than the sector average of 4.29. The company's shares are currently trading 375.4% above their Graham number.

PepsiCo Has an Average Rating of Buy:

The 19 analysts following PepsiCo have set target prices ranging from $163.15 to $199.41 per share, for an average of $184.03 with a buy rating. As of April 2023, the company is trading 0.9% away from its average target price, indicating that there is an analyst consensus of little upside potential.

PepsiCo has a very low short interest because 0.8% of the company's shares are sold short. Institutions own 75.9% of the company's shares, and the insider ownership rate stands at 0.15%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $24,629,260,331.

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.