PepsiCo Inc (PEP) stock analysis

P/E below its 5-year median

PepsiCo's P/E of 18.1 is below its own 5-year median of 26.0.

P/E below the industry

PepsiCo's P/E of 18.1 is below the Beverages median of 32.8.

EV/EBITDA below its 5-year median

PepsiCo's EV/EBITDA of 12.7 is below its 5-year median of 17.9.

P/B above the industry

PepsiCo's price-to-book of 8.80 is above the Beverages median of 2.94.

Trading below fair value

The share price of $143.94 is below our fair value estimate of $195.86.

Margin of safety over 20%

The price is 26.5% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 2.8% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew -2.2% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 50.9% over the last twelve months, against a 5-year average of 3.0% a year.

Growing faster than the industry

Revenue grew 6.4% over the last twelve months; the Beverages median is 4.5%.

Guidance raised

PepsiCo raised its Fiscal 2026 Net Revenue outlook on Oct 7, 2026.

Gross margin improving

Gross margin was 54.2% over the last twelve months, against 54.0% a year earlier.

Return on equity over 15%

Return on equity was 52.3% over the last twelve months and averaged 50.3% over five years.

Return on capital over 10%

Return on invested capital was 18.8%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

PepsiCo's return on equity of 52.3% is above the Beverages median of 16.5%.

Earnings grew over 5 years

Net income grew 3.0% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 11.1% over the last twelve months, against a 5-year average of 9.8%.

Net margin above the industry

PepsiCo's net margin of 11.1% is above the Beverages median of 7.3%.

High debt

Debt is 233% of shareholders' equity, above the 40% we consider low.

Debt falling against equity

Debt to equity fell from 328% five years ago to 233%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 28.1% of total debt.

Interest well covered

Operating income covers interest expense 13.6 times.

Short-term assets don't cover short-term debts

Current assets are 0.94 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 3.55; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

PepsiCo paid dividends worth 4.0% of the share price over the last twelve months.

Yield below Treasuries

The 4.0% yield is below the 4.4% on a 1-year Treasury.

Yield in the top quarter

The top quarter of US dividend payers yield 3.8% or more; PepsiCo yields 4.0%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 72.3% of net income.

Covered by free cash flow

Dividends take 75.3% of free cash flow.