PEP

What Should You Know About PepsiCo (PEP)?

We've been asking ourselves recently if the market has placed a fair valuation on PepsiCo. Let's dive into some of the fundamental values of this large-cap Consumer Staples company to determine if there might be an opportunity here for value-minded investors.

PepsiCo Has Elevated P/B and P/E Ratios:

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 30.6 and a P/B ratio of 13.65.

PepsiCo's PEG ratio is 2.79, 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.

Overview of the Company's Finances:

2018-02-13 2019-02-15 2020-02-13 2021-02-11 2022-02-10 2023-02-09
Revenue (MM) $63,525 $64,661 $67,161 $70,372 $79,474 $86,392
Gross Margins 55.0% 55.0% 55.0% 55.0% 53.0% 53.0%
Operating Margins 16% 16% 15% 14% 14% 13%
Net Margins 8.0% 19.0% 11.0% 10.0% 10.0% 10.0%
Net Income (MM) $4,857 $12,515 $7,314 $7,120 $7,618 $8,910
Net Interest Expense (MM) -$907 -$1,219 -$935 -$1,128 -$1,863 -$939
Depreciation & Amort. (MM) -$2,369 -$2,399 -$2,432 -$2,548 -$2,710 -$2,763
Earnings Per Share $3.38 $8.78 $5.2 $5.11 $5.48 $6.42
EPS Growth n/a 159.76% -40.77% -1.73% 7.24% 17.15%
Diluted Shares (MM) 1,438 1,425 1,407 1,392 1,389 1,387
Free Cash Flow (MM) $12,819 $12,563 $9,479 $10,558 $11,450 $10,560
Capital Expenditures (MM) -$2,789 -$3,148 $170 $55 $166 $251
Net Current Assets (MM) -$37,796 -$41,153 -$46,034 -$56,365 -$54,443 -$53,375
Long Term Debt (MM) $33,796 $28,295 $29,148 $40,370 $36,026 $35,657
Net Debt / EBITDA 1.56 1.86 2.07 2.73 2.48 2.39

PepsiCo has weak revenue growth and a flat capital expenditure trend, weak operating margings with a stable trend, and irregular cash flows. In addition, we note significant leverage. We also note that the company has positive EPS growth working in its favor. However, the firm has slimmer gross margins than its peers.

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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