Is PepsiCo Inc (PEP) overvalued?
On Equity Rank's model estimate, PEP trades 21% below its fair value. PepsiCo Inc (PEP) last closed at $141.34; the multi-method model fair value is $178.05.
| Price | Model fair value | Price vs model |
|---|---|---|
| $141.34 | $178.05 | 21% below |
What the answer rests on
- 5 of 10 valuation methods put PEP's value above its price and 5 put it below, so the methods disagree.
- To justify today's price, PEP's free cash flow would need to grow about 1.7% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 11.0% a year.
- PEP trades at 17.9 times its last year's earnings, against a median of 22.4 for 19 profitable Beverages companies.
- Over the past year the price sat below the model fair value on 100% of trading days. The gap ranged from 35% below to 2% below 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 PEP's fair value · What prices assume · Other companies