Intrinsic value of PepsiCo - PEP

Previous Close

$117.39

  Intrinsic Value

$59.61

stock screener

  Rating & Target

sell

-49%

Previous close

$117.39

 
Intrinsic value

$59.61

 
Up/down potential

-49%

 
Rating

sell

We calculate the intrinsic value of PEP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 166.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.41
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  62,799
  64,055
  65,528
  67,212
  69,103
  71,198
  73,497
  76,000
  78,709
  81,628
  84,761
  88,112
  91,688
  95,496
  99,543
  103,836
  108,387
  113,204
  118,298
  123,680
  129,363
  135,359
  141,682
  148,348
  155,371
  162,768
  170,556
  178,753
  187,379
  196,453
  205,998
Variable operating expenses, $m
 
  55,571
  56,816
  58,239
  59,837
  61,607
  63,549
  65,664
  67,954
  70,421
  73,068
  74,457
  77,479
  80,696
  84,116
  87,744
  91,589
  95,660
  99,964
  104,512
  109,314
  114,381
  119,725
  125,357
  131,292
  137,542
  144,123
  151,050
  158,339
  166,007
  174,073
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  53,014
  55,571
  56,816
  58,239
  59,837
  61,607
  63,549
  65,664
  67,954
  70,421
  73,068
  74,457
  77,479
  80,696
  84,116
  87,744
  91,589
  95,660
  99,964
  104,512
  109,314
  114,381
  119,725
  125,357
  131,292
  137,542
  144,123
  151,050
  158,339
  166,007
  174,073
Operating income, $m
  9,785
  8,484
  8,712
  8,973
  9,266
  9,591
  9,947
  10,335
  10,755
  11,208
  11,693
  13,655
  14,210
  14,800
  15,427
  16,092
  16,798
  17,544
  18,334
  19,168
  20,048
  20,978
  21,958
  22,991
  24,079
  25,225
  26,432
  27,703
  29,040
  30,446
  31,925
EBITDA, $m
  12,153
  11,556
  11,822
  12,126
  12,467
  12,845
  13,259
  13,711
  14,200
  14,726
  15,292
  15,896
  16,541
  17,228
  17,958
  18,733
  19,554
  20,423
  21,342
  22,313
  23,338
  24,420
  25,561
  26,763
  28,030
  29,365
  30,770
  32,248
  33,805
  35,442
  37,164
Interest expense (income), $m
  1,102
  1,052
  952
  994
  1,043
  1,097
  1,157
  1,224
  1,296
  1,373
  1,457
  1,548
  1,644
  1,747
  1,856
  1,973
  2,096
  2,227
  2,366
  2,512
  2,667
  2,831
  3,003
  3,185
  3,377
  3,579
  3,792
  4,016
  4,251
  4,500
  4,761
Earnings before tax, $m
  8,553
  7,432
  7,761
  7,979
  8,224
  8,494
  8,790
  9,112
  9,460
  9,834
  10,236
  12,108
  12,566
  13,053
  13,571
  14,120
  14,701
  15,317
  15,968
  16,655
  17,381
  18,147
  18,955
  19,806
  20,702
  21,647
  22,641
  23,687
  24,788
  25,946
  27,165
Tax expense, $m
  2,174
  2,007
  2,095
  2,154
  2,220
  2,293
  2,373
  2,460
  2,554
  2,655
  2,764
  3,269
  3,393
  3,524
  3,664
  3,812
  3,969
  4,136
  4,311
  4,497
  4,693
  4,900
  5,118
  5,348
  5,590
  5,845
  6,113
  6,396
  6,693
  7,006
  7,334
Net income, $m
  6,329
  5,426
  5,665
  5,825
  6,003
  6,201
  6,417
  6,652
  6,906
  7,179
  7,472
  8,839
  9,173
  9,529
  9,906
  10,307
  10,732
  11,181
  11,656
  12,158
  12,688
  13,247
  13,837
  14,458
  15,113
  15,802
  16,528
  17,292
  18,095
  18,941
  19,830

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  16,125
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  73,490
  58,498
  59,843
  61,381
  63,108
  65,021
  67,120
  69,406
  71,881
  74,546
  77,407
  80,468
  83,734
  87,211
  90,906
  94,828
  98,983
  103,382
  108,034
  112,950
  118,139
  123,615
  129,390
  135,478
  141,891
  148,646
  155,758
  163,244
  171,122
  179,409
  188,126
Adjusted assets (=assets-cash), $m
  57,365
  58,498
  59,843
  61,381
  63,108
  65,021
  67,120
  69,406
  71,881
  74,546
  77,407
  80,468
  83,734
  87,211
  90,906
  94,828
  98,983
  103,382
  108,034
  112,950
  118,139
  123,615
  129,390
  135,478
  141,891
  148,646
  155,758
  163,244
  171,122
  179,409
  188,126
Revenue / Adjusted assets
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
Average production assets, $m
  29,711
  30,298
  30,995
  31,791
  32,686
  33,677
  34,764
  35,948
  37,229
  38,610
  40,092
  41,677
  43,369
  45,170
  47,084
  49,115
  51,267
  53,545
  55,955
  58,501
  61,188
  64,025
  67,016
  70,169
  73,490
  76,989
  80,673
  84,550
  88,630
  92,922
  97,437
Working capital, $m
  5,315
  -3,971
  -4,063
  -4,167
  -4,284
  -4,414
  -4,557
  -4,712
  -4,880
  -5,061
  -5,255
  -5,463
  -5,685
  -5,921
  -6,172
  -6,438
  -6,720
  -7,019
  -7,334
  -7,668
  -8,020
  -8,392
  -8,784
  -9,198
  -9,633
  -10,092
  -10,574
  -11,083
  -11,617
  -12,180
  -12,772
Total debt, $m
  36,945
  27,198
  28,409
  29,793
  31,347
  33,069
  34,958
  37,016
  39,242
  41,642
  44,216
  46,971
  49,910
  53,040
  56,366
  59,895
  63,635
  67,594
  71,781
  76,205
  80,875
  85,804
  91,001
  96,480
  102,252
  108,332
  114,733
  121,470
  128,560
  136,018
  143,864
Total liabilities, $m
  62,395
  52,648
  53,859
  55,243
  56,797
  58,519
  60,408
  62,466
  64,692
  67,092
  69,666
  72,421
  75,360
  78,490
  81,816
  85,345
  89,085
  93,044
  97,231
  101,655
  106,325
  111,254
  116,451
  121,930
  127,702
  133,782
  140,183
  146,920
  154,010
  161,468
  169,314
Total equity, $m
  11,095
  5,850
  5,984
  6,138
  6,311
  6,502
  6,712
  6,941
  7,188
  7,455
  7,741
  8,047
  8,373
  8,721
  9,091
  9,483
  9,898
  10,338
  10,803
  11,295
  11,814
  12,362
  12,939
  13,548
  14,189
  14,865
  15,576
  16,324
  17,112
  17,941
  18,813
Total liabilities and equity, $m
  73,490
  58,498
  59,843
  61,381
  63,108
  65,021
  67,120
  69,407
  71,880
  74,547
  77,407
  80,468
  83,733
  87,211
  90,907
  94,828
  98,983
  103,382
  108,034
  112,950
  118,139
  123,616
  129,390
  135,478
  141,891
  148,647
  155,759
  163,244
  171,122
  179,409
  188,127
Debt-to-equity ratio
  3.330
  4.650
  4.750
  4.850
  4.970
  5.090
  5.210
  5.330
  5.460
  5.590
  5.710
  5.840
  5.960
  6.080
  6.200
  6.320
  6.430
  6.540
  6.640
  6.750
  6.850
  6.940
  7.030
  7.120
  7.210
  7.290
  7.370
  7.440
  7.510
  7.580
  7.650
Adjusted equity ratio
  -0.088
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,329
  5,426
  5,665
  5,825
  6,003
  6,201
  6,417
  6,652
  6,906
  7,179
  7,472
  8,839
  9,173
  9,529
  9,906
  10,307
  10,732
  11,181
  11,656
  12,158
  12,688
  13,247
  13,837
  14,458
  15,113
  15,802
  16,528
  17,292
  18,095
  18,941
  19,830
Depreciation, amort., depletion, $m
  2,368
  3,072
  3,109
  3,152
  3,200
  3,254
  3,312
  3,376
  3,445
  3,519
  3,598
  2,241
  2,332
  2,428
  2,531
  2,641
  2,756
  2,879
  3,008
  3,145
  3,290
  3,442
  3,603
  3,773
  3,951
  4,139
  4,337
  4,546
  4,765
  4,996
  5,239
Funds from operations, $m
  11,250
  8,497
  8,775
  8,977
  9,204
  9,454
  9,729
  10,027
  10,350
  10,698
  11,070
  11,079
  11,505
  11,957
  12,438
  12,948
  13,488
  14,060
  14,665
  15,304
  15,978
  16,690
  17,440
  18,231
  19,064
  19,941
  20,865
  21,837
  22,860
  23,937
  25,069
Change in working capital, $m
  846
  -78
  -91
  -104
  -117
  -130
  -143
  -155
  -168
  -181
  -194
  -208
  -222
  -236
  -251
  -266
  -282
  -299
  -316
  -334
  -352
  -372
  -392
  -413
  -435
  -459
  -483
  -508
  -535
  -563
  -592
Cash from operations, $m
  10,404
  8,575
  8,866
  9,081
  9,321
  9,584
  9,871
  10,182
  10,518
  10,879
  11,265
  11,287
  11,726
  12,193
  12,689
  13,214
  13,770
  14,359
  14,981
  15,637
  16,330
  17,061
  17,832
  18,644
  19,499
  20,400
  21,348
  22,346
  23,395
  24,499
  25,660
Maintenance CAPEX, $m
  0
  -1,597
  -1,629
  -1,666
  -1,709
  -1,757
  -1,811
  -1,869
  -1,933
  -2,002
  -2,076
  -2,155
  -2,241
  -2,332
  -2,428
  -2,531
  -2,641
  -2,756
  -2,879
  -3,008
  -3,145
  -3,290
  -3,442
  -3,603
  -3,773
  -3,951
  -4,139
  -4,337
  -4,546
  -4,765
  -4,996
New CAPEX, $m
  -3,040
  -587
  -697
  -797
  -894
  -991
  -1,087
  -1,184
  -1,282
  -1,381
  -1,482
  -1,585
  -1,691
  -1,801
  -1,914
  -2,031
  -2,152
  -2,278
  -2,409
  -2,546
  -2,688
  -2,836
  -2,991
  -3,153
  -3,322
  -3,499
  -3,684
  -3,877
  -4,080
  -4,292
  -4,515
Cash from investing activities, $m
  -7,148
  -2,184
  -2,326
  -2,463
  -2,603
  -2,748
  -2,898
  -3,053
  -3,215
  -3,383
  -3,558
  -3,740
  -3,932
  -4,133
  -4,342
  -4,562
  -4,793
  -5,034
  -5,288
  -5,554
  -5,833
  -6,126
  -6,433
  -6,756
  -7,095
  -7,450
  -7,823
  -8,214
  -8,626
  -9,057
  -9,511
Free cash flow, $m
  3,256
  6,391
  6,540
  6,618
  6,717
  6,836
  6,973
  7,129
  7,304
  7,496
  7,707
  7,547
  7,794
  8,061
  8,346
  8,652
  8,977
  9,324
  9,692
  10,083
  10,497
  10,935
  11,399
  11,888
  12,405
  12,950
  13,525
  14,131
  14,769
  15,442
  16,150
Issuance/(repayment) of debt, $m
  3,746
  -2,855
  1,211
  1,384
  1,554
  1,722
  1,889
  2,057
  2,227
  2,399
  2,575
  2,755
  2,939
  3,129
  3,326
  3,529
  3,740
  3,959
  4,187
  4,424
  4,671
  4,928
  5,197
  5,479
  5,772
  6,080
  6,401
  6,737
  7,090
  7,459
  7,845
Issuance/(repurchase) of shares, $m
  -2,542
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,285
  -2,855
  1,211
  1,384
  1,554
  1,722
  1,889
  2,057
  2,227
  2,399
  2,575
  2,755
  2,939
  3,129
  3,326
  3,529
  3,740
  3,959
  4,187
  4,424
  4,671
  4,928
  5,197
  5,479
  5,772
  6,080
  6,401
  6,737
  7,090
  7,459
  7,845
Total cash flow (excl. dividends), $m
  4,289
  3,536
  7,751
  8,003
  8,271
  8,558
  8,863
  9,187
  9,531
  9,896
  10,282
  10,301
  10,733
  11,190
  11,672
  12,181
  12,718
  13,283
  13,879
  14,507
  15,168
  15,864
  16,596
  17,367
  18,177
  19,030
  19,926
  20,868
  21,859
  22,901
  23,995
Retained Cash Flow (-), $m
  828
  -3,988
  -135
  -154
  -173
  -191
  -210
  -229
  -247
  -267
  -286
  -306
  -327
  -348
  -370
  -392
  -416
  -440
  -465
  -492
  -519
  -548
  -577
  -609
  -641
  -676
  -711
  -749
  -788
  -829
  -872
Prev. year cash balance distribution, $m
 
  9,233
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  8,781
  7,616
  7,849
  8,099
  8,366
  8,653
  8,958
  9,283
  9,629
  9,996
  9,995
  10,407
  10,842
  11,303
  11,789
  12,302
  12,843
  13,414
  14,015
  14,649
  15,316
  16,019
  16,758
  17,536
  18,354
  19,215
  20,120
  21,071
  22,072
  23,123
Discount rate, %
 
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
 
  8,308
  6,781
  6,537
  6,272
  5,985
  5,678
  5,351
  5,008
  4,651
  4,284
  3,764
  3,408
  3,054
  2,707
  2,371
  2,050
  1,749
  1,471
  1,219
  993
  796
  626
  483
  365
  270
  195
  138
  95
  64
  42
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

PepsiCo, Inc. is a global food and beverage company. The Company's portfolio of brands includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. The Company operates through six segments: Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), North America Beverages (NAB), Latin America, Europe Sub-Saharan Africa (ESSA), and Asia, Middle East and North Africa (AMENA). The FLNA segment includes its branded food and snack businesses in the United States and Canada. The QFNA segment includes its cereal, rice, pasta and other branded food businesses in the United States and Canada. The NAB segment includes its beverage businesses in the United States and Canada. The Latin America segment includes its beverage, food and snack businesses in Latin America. The ESSA segment includes its beverage, food and snack businesses in Europe and Sub-Saharan Africa. The AMENA segment includes its beverage, food and snack businesses in Asia, Middle East and North Africa.

FINANCIAL RATIOS  of  PepsiCo (PEP)

Valuation Ratios
P/E Ratio 26.5
Price to Sales 2.7
Price to Book 15.1
Price to Tangible Book
Price to Cash Flow 16.1
Price to Free Cash Flow 22.8
Growth Rates
Sales Growth Rate -0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.2%
Cap. Spend. - 3 Yr. Gr. Rate 1.7%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 270.9%
Total Debt to Equity 333%
Interest Coverage 9
Management Effectiveness
Return On Assets 10%
Ret/ On Assets - 3 Yr. Avg. 9.5%
Return On Total Capital 13.6%
Ret/ On T. Cap. - 3 Yr. Avg. 12.8%
Return On Equity 55%
Return On Equity - 3 Yr. Avg. 41.1%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 55.1%
Gross Margin - 3 Yr. Avg. 54.2%
EBITDA Margin 19.1%
EBITDA Margin - 3 Yr. Avg. 18.2%
Operating Margin 15.6%
Oper. Margin - 3 Yr. Avg. 14.4%
Pre-Tax Margin 13.6%
Pre-Tax Margin - 3 Yr. Avg. 12.9%
Net Profit Margin 10.1%
Net Profit Margin - 3 Yr. Avg. 9.5%
Effective Tax Rate 25.4%
Eff/ Tax Rate - 3 Yr. Avg. 25.5%
Payout Ratio 66.8%

PEP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PEP stock intrinsic value calculation we used $62799 million for the last fiscal year's total revenue generated by PepsiCo. The default revenue input number comes from 2016 income statement of PepsiCo. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PEP stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.7%, whose default value for PEP is calculated based on our internal credit rating of PepsiCo, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of PepsiCo.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PEP stock the variable cost ratio is equal to 86.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PEP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for PepsiCo.

Corporate tax rate of 27% is the nominal tax rate for PepsiCo. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PEP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PEP are equal to 47.3%.

Life of production assets of 18.6 years is the average useful life of capital assets used in PepsiCo operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PEP is equal to -6.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $11095 million for PepsiCo - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1422.18 million for PepsiCo is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of PepsiCo at the current share price and the inputted number of shares is $166.9 billion.

RELATED COMPANIES Price Int.Val. Rating
DPS Dr Pepper Snap 94.52 131.40  buy
KO Coca-Cola 45.33 17.04  str.sell
MDLZ Mondelez Inter 42.87 43.19  hold
K Kellogg 66.55 22.76  str.sell
FIZZ National Bever 101.19 214.20  str.buy

COMPANY NEWS

▶ Tesla Stock Pops as PepsiCo Pre-Orders 100 Semi Trucks   [Dec-12-17 11:55AM  TheStreet.com]
▶ Tesla closes its biggest semi truck pre-order to date (Video)   [10:14AM  American City Business Journals]
▶ Pepsico"s Stock Moves to the Nasdaq   [Dec-11-17 10:53AM  GuruFocus.com]
▶ Should PepsiCo Buy This Beaten-Down Company?   [Nov-27-17 08:16AM  Motley Fool]
▶ Alternative health drinks are battling big name brands   [Nov-22-17 11:20AM  Yahoo Finance Video]
▶ Could Pepsi Buy Hain Celestial?   [Nov-21-17 04:54PM  TheStreet.com]
▶ Pairing the perfect wine for Thanksgiving   [11:21AM  Yahoo Finance Video]
▶ Yahoo Finance Live: Market Movers - Nov 21st, 2017   [07:20AM  Yahoo Finance Video]
▶ Carlos Slim's Net Worth: How He Built His Wealth   [Nov-20-17 01:23PM  Investopedia]
▶ Pepsi raises dividend 7% to 80.5 cents   [Nov-17-17 04:21PM  MarketWatch]
▶ PepsiCo Declares Quarterly Dividend   [04:15PM  PR Newswire]
▶ Consumer Staples ETFs Head to Head: XLP vs. VDC   [Nov-15-17 06:38PM  Zacks]
▶ Top Staples Dividend Picks For The Day   [03:02PM  Simply Wall St.]
▶ Fountain of Truth: Coke Needs M&A   [11:49AM  Barrons.com]
▶ 3 High-Yield Stocks to Hold Forever   [09:35AM  Motley Fool]
▶ Why investing for kids can have huge payoff   [Nov-10-17 07:22PM  CNBC Videos]
▶ 5 traits successful CEOs & military leaders share   [Nov-09-17 06:55PM  CNBC Videos]
▶ The 15 Most Popular Snack Brands in the World   [Nov-05-17 10:00AM  Insider Monkey]
▶ 3 Stocks That Could Soar More Than Pepsi   [Oct-30-17 08:00PM  Motley Fool]
▶ Uber hires new legal chief as scrutiny intensifies   [12:10PM  American City Business Journals]
▶ Why Dr Pepper Snapples Earnings Fell in 3Q17   [11:35AM  Market Realist]
▶ Coca-Cola should buy Monster Beverage   [Oct-27-17 07:05PM  CNBC Videos]
▶ Companies are looking for diverse ad teams to avoid blunders   [Oct-26-17 06:18PM  Associated Press]
▶ Coca-Cola Is Taking Aim at La Croix   [Oct-25-17 06:48PM  Motley Fool]
Financial statements of PEP
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.