Is Diageo PLC ADR (DEO) overvalued?
On Equity Rank's model estimate, DEO trades close to its fair value (6% above it). Diageo PLC ADR (DEO) last closed at $99.76; the multi-method model fair value is $93.95.
| Price | Model fair value | Price vs model |
|---|---|---|
| $99.76 | $93.95 | 6% above |
What the answer rests on
- 2 of 11 valuation methods put DEO's value above its price and 9 put it below, so the methods mostly agree.
- To justify today's price, DEO's free cash flow would need to grow about -0.4% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 8.9% a year.
- DEO trades at 31.3 times its last year's earnings, against a median of 20.3 for 19 profitable Beverages companies.
- Over the past year the price sat below the model fair value on 84% of trading days. The gap ranged from 26% below to 8% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind DEO's fair value · What prices assume · Other companies