Today we're going to take a closer look at large-cap Consumer Staples company PepsiCo, whose shares are currently trading at $169.14. 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!
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 21.21 and an average price to book (P/B) ratio of 4.12. In contrast, PepsiCo has a trailing 12 month P/E ratio of 28.1 and a P/B ratio of 12.37.
PepsiCo's PEG ratio is 2.59, 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:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $64,661 | $67,161 | $70,372 | $79,474 | $86,392 | $149,564 |
| Revenue Growth | n/a | 3.87% | 4.78% | 12.93% | 8.7% | 73.12% |
| Gross Margins | 55% | 55% | 55% | 53% | 53% | 55% |
| Operating Margins | 16% | 15% | 14% | 14% | 13% | 16% |
| Net Margins | 19% | 11% | 10% | 10% | 10% | 12% |
| Net Income (MM) | $12,559 | $7,353 | $7,175 | $7,679 | $8,978 | $18,433 |
| Net Interest Expense (MM) | $1,219 | $935 | $1,128 | $1,863 | $939 | $1,405 |
| Depreciation & Amort. (MM) | $2,399 | $2,432 | $2,548 | $2,710 | $2,763 | $2,882 |
| Earnings Per Share | $8.78 | $5.2 | $5.12 | $5.49 | $6.42 | $13.23 |
| EPS Growth | n/a | -40.77% | -1.54% | 7.23% | 16.94% | 106.07% |
| Diluted Shares (MM) | 1,428 | 1,411 | 1,395 | 1,389 | 1,387 | 5,535 |
| Free Cash Flow (MM) | $6,133 | $5,417 | $6,373 | $6,991 | $5,604 | $6,947 |
| Capital Expenditures (MM) | $3,282 | $4,232 | $4,240 | $4,625 | $5,207 | $5,188 |
| Current Ratio | 0.99 | 0.86 | 0.98 | 0.83 | 0.8 | 0.88 |
| Long Term Debt (MM) | $28,295 | $29,148 | $40,370 | $36,026 | $35,657 | $35,657 |
| Net Debt / EBITDA | 2.18 | 2.25 | 3.04 | 2.72 | 2.64 | 1.42 |
PepsiCo has growing revenues and increasing reinvestment in the business, positive EPS growth, and healthy leverage. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a stable trend. Finally, we note that PepsiCo has irregular cash flows.
