PEP

Read This to Understand PepsiCo Stock

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.

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 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 27.8 and a P/B ratio of 12.21.

PepsiCo's PEG ratio is 2.58, 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%
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
Total Debt (MM) $35,992 $34,118 $46,542 $43,338 $42,590 $48,465
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 weak operating margins with a stable trend and irregular cash flows.

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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