Intrinsic value of Diageo plc - DEO

Previous Close

$172.19

  Intrinsic Value

$86.47

stock screener

  Rating & Target

sell

-50%

Previous close

$172.19

 
Intrinsic value

$86.47

 
Up/down potential

-50%

 
Rating

sell

We calculate the intrinsic value of DEO 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 0001), $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 103.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.20
  2.48
  2.73
  2.96
  3.16
  3.35
  3.51
  3.66
  3.79
  3.92
  4.02
  4.12
  4.21
  4.29
  4.36
  4.42
  4.48
  4.53
  4.58
  4.62
  4.66
  4.69
  4.72
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
Revenue, $m
  16,574
  16,985
  17,449
  17,965
  18,533
  19,154
  19,826
  20,552
  21,332
  22,167
  23,059
  24,009
  25,020
  26,093
  27,230
  28,435
  29,709
  31,056
  32,478
  33,979
  35,563
  37,232
  38,991
  40,843
  42,794
  44,848
  47,009
  49,283
  51,675
  54,191
Variable operating expenses, $m
  5,267
  5,356
  5,456
  5,568
  5,691
  5,826
  5,971
  6,129
  6,297
  6,478
  4,995
  5,201
  5,420
  5,653
  5,899
  6,160
  6,436
  6,728
  7,036
  7,361
  7,704
  8,066
  8,447
  8,848
  9,271
  9,716
  10,184
  10,676
  11,195
  11,740
Fixed operating expenses, $m
  6,386
  6,527
  6,671
  6,817
  6,967
  7,121
  7,277
  7,437
  7,601
  7,768
  7,939
  8,114
  8,292
  8,475
  8,661
  8,852
  9,046
  9,245
  9,449
  9,657
  9,869
  10,086
  10,308
  10,535
  10,767
  11,004
  11,246
  11,493
  11,746
  12,004
Total operating expenses, $m
  11,653
  11,883
  12,127
  12,385
  12,658
  12,947
  13,248
  13,566
  13,898
  14,246
  12,934
  13,315
  13,712
  14,128
  14,560
  15,012
  15,482
  15,973
  16,485
  17,018
  17,573
  18,152
  18,755
  19,383
  20,038
  20,720
  21,430
  22,169
  22,941
  23,744
Operating income, $m
  4,921
  5,102
  5,322
  5,580
  5,875
  6,207
  6,578
  6,986
  7,433
  7,920
  10,125
  10,694
  11,308
  11,966
  12,670
  13,423
  14,227
  15,083
  15,994
  16,962
  17,989
  19,080
  20,236
  21,460
  22,757
  24,129
  25,580
  27,114
  28,735
  30,447
EBITDA, $m
  7,064
  7,257
  7,490
  7,762
  8,073
  8,423
  8,812
  9,241
  9,711
  10,221
  10,774
  11,371
  12,012
  12,701
  13,437
  14,224
  15,064
  15,957
  16,908
  17,919
  18,991
  20,129
  21,334
  22,611
  23,962
  25,392
  26,904
  28,502
  30,190
  31,973
Interest expense (income), $m
  599
  745
  777
  813
  854
  899
  949
  1,003
  1,062
  1,126
  1,194
  1,268
  1,346
  1,430
  1,518
  1,612
  1,712
  1,818
  1,930
  2,048
  2,173
  2,305
  2,444
  2,590
  2,745
  2,908
  3,079
  3,259
  3,449
  3,649
  3,859
Earnings before tax, $m
  4,176
  4,325
  4,509
  4,726
  4,976
  5,259
  5,574
  5,924
  6,307
  6,726
  8,857
  9,348
  9,878
  10,447
  11,058
  11,711
  12,409
  13,153
  13,945
  14,788
  15,684
  16,636
  17,645
  18,716
  19,849
  21,050
  22,321
  23,665
  25,086
  26,588
Tax expense, $m
  1,127
  1,168
  1,217
  1,276
  1,343
  1,420
  1,505
  1,599
  1,703
  1,816
  2,391
  2,524
  2,667
  2,821
  2,986
  3,162
  3,350
  3,551
  3,765
  3,993
  4,235
  4,492
  4,764
  5,053
  5,359
  5,684
  6,027
  6,390
  6,773
  7,179
Net income, $m
  3,048
  3,157
  3,292
  3,450
  3,632
  3,839
  4,069
  4,324
  4,604
  4,910
  6,465
  6,824
  7,211
  7,627
  8,072
  8,549
  9,058
  9,602
  10,180
  10,796
  11,450
  12,144
  12,881
  13,662
  14,490
  15,367
  16,294
  17,275
  18,313
  19,409

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  40,523
  41,528
  42,662
  43,924
  45,314
  46,830
  48,475
  50,249
  52,156
  54,198
  56,379
  58,703
  61,174
  63,797
  66,578
  69,523
  72,639
  75,931
  79,409
  83,079
  86,950
  91,031
  95,332
  99,862
  104,632
  109,653
  114,937
  120,497
  126,345
  132,496
Adjusted assets (=assets-cash), $m
  40,523
  41,528
  42,662
  43,924
  45,314
  46,830
  48,475
  50,249
  52,156
  54,198
  56,379
  58,703
  61,174
  63,797
  66,578
  69,523
  72,639
  75,931
  79,409
  83,079
  86,950
  91,031
  95,332
  99,862
  104,632
  109,653
  114,937
  120,497
  126,345
  132,496
Revenue / Adjusted assets
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
Average production assets, $m
  14,005
  14,352
  14,744
  15,181
  15,661
  16,185
  16,753
  17,366
  18,025
  18,731
  19,485
  20,288
  21,142
  22,049
  23,010
  24,028
  25,104
  26,242
  27,444
  28,712
  30,050
  31,461
  32,947
  34,513
  36,161
  37,897
  39,723
  41,644
  43,666
  45,791
Working capital, $m
  4,740
  4,858
  4,990
  5,138
  5,301
  5,478
  5,670
  5,878
  6,101
  6,340
  6,595
  6,867
  7,156
  7,463
  7,788
  8,132
  8,497
  8,882
  9,289
  9,718
  10,171
  10,648
  11,151
  11,681
  12,239
  12,827
  13,445
  14,095
  14,779
  15,499
Total debt, $m
  14,384
  15,052
  15,806
  16,646
  17,570
  18,578
  19,672
  20,852
  22,120
  23,478
  24,928
  26,473
  28,116
  29,861
  31,710
  33,669
  35,741
  37,930
  40,243
  42,683
  45,258
  47,972
  50,832
  53,844
  57,016
  60,355
  63,869
  67,566
  71,456
  75,546
Total liabilities, $m
  26,948
  27,616
  28,370
  29,210
  30,134
  31,142
  32,236
  33,416
  34,684
  36,042
  37,492
  39,037
  40,680
  42,425
  44,274
  46,233
  48,305
  50,494
  52,807
  55,247
  57,822
  60,536
  63,396
  66,408
  69,580
  72,919
  76,433
  80,130
  84,020
  88,110
Total equity, $m
  13,575
  13,912
  14,292
  14,715
  15,180
  15,688
  16,239
  16,834
  17,472
  18,156
  18,887
  19,665
  20,493
  21,372
  22,304
  23,290
  24,334
  25,437
  26,602
  27,831
  29,128
  30,495
  31,936
  33,454
  35,052
  36,734
  38,504
  40,366
  42,326
  44,386
Total liabilities and equity, $m
  40,523
  41,528
  42,662
  43,925
  45,314
  46,830
  48,475
  50,250
  52,156
  54,198
  56,379
  58,702
  61,173
  63,797
  66,578
  69,523
  72,639
  75,931
  79,409
  83,078
  86,950
  91,031
  95,332
  99,862
  104,632
  109,653
  114,937
  120,496
  126,346
  132,496
Debt-to-equity ratio
  1.060
  1.080
  1.110
  1.130
  1.160
  1.180
  1.210
  1.240
  1.270
  1.290
  1.320
  1.350
  1.370
  1.400
  1.420
  1.450
  1.470
  1.490
  1.510
  1.530
  1.550
  1.570
  1.590
  1.610
  1.630
  1.640
  1.660
  1.670
  1.690
  1.700
Adjusted equity ratio
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,048
  3,157
  3,292
  3,450
  3,632
  3,839
  4,069
  4,324
  4,604
  4,910
  6,465
  6,824
  7,211
  7,627
  8,072
  8,549
  9,058
  9,602
  10,180
  10,796
  11,450
  12,144
  12,881
  13,662
  14,490
  15,367
  16,294
  17,275
  18,313
  19,409
Depreciation, amort., depletion, $m
  2,143
  2,155
  2,168
  2,182
  2,198
  2,216
  2,235
  2,255
  2,277
  2,301
  649
  676
  705
  735
  767
  801
  837
  875
  915
  957
  1,002
  1,049
  1,098
  1,150
  1,205
  1,263
  1,324
  1,388
  1,456
  1,526
Funds from operations, $m
  5,191
  5,312
  5,459
  5,632
  5,831
  6,055
  6,304
  6,580
  6,882
  7,211
  7,115
  7,501
  7,916
  8,362
  8,839
  9,350
  9,895
  10,476
  11,095
  11,753
  12,451
  13,193
  13,979
  14,813
  15,695
  16,630
  17,618
  18,663
  19,768
  20,936
Change in working capital, $m
  102
  118
  133
  148
  163
  177
  192
  208
  223
  239
  255
  272
  289
  307
  325
  344
  364
  385
  407
  429
  453
  477
  503
  530
  558
  587
  618
  650
  684
  719
Cash from operations, $m
  5,089
  5,195
  5,327
  5,485
  5,668
  5,877
  6,112
  6,372
  6,659
  6,972
  6,860
  7,229
  7,627
  8,055
  8,514
  9,005
  9,531
  10,091
  10,688
  11,323
  11,999
  12,716
  13,476
  14,283
  15,137
  16,042
  17,000
  18,013
  19,084
  20,216
Maintenance CAPEX, $m
  -457
  -467
  -478
  -491
  -506
  -522
  -539
  -558
  -579
  -601
  -624
  -649
  -676
  -705
  -735
  -767
  -801
  -837
  -875
  -915
  -957
  -1,002
  -1,049
  -1,098
  -1,150
  -1,205
  -1,263
  -1,324
  -1,388
  -1,456
New CAPEX, $m
  -305
  -347
  -392
  -436
  -480
  -524
  -568
  -613
  -659
  -706
  -754
  -803
  -854
  -907
  -961
  -1,018
  -1,077
  -1,138
  -1,202
  -1,268
  -1,338
  -1,410
  -1,486
  -1,566
  -1,649
  -1,735
  -1,826
  -1,921
  -2,021
  -2,126
Cash from investing activities, $m
  -762
  -814
  -870
  -927
  -986
  -1,046
  -1,107
  -1,171
  -1,238
  -1,307
  -1,378
  -1,452
  -1,530
  -1,612
  -1,696
  -1,785
  -1,878
  -1,975
  -2,077
  -2,183
  -2,295
  -2,412
  -2,535
  -2,664
  -2,799
  -2,940
  -3,089
  -3,245
  -3,409
  -3,582
Free cash flow, $m
  4,328
  4,380
  4,456
  4,557
  4,682
  4,831
  5,004
  5,200
  5,421
  5,665
  5,482
  5,776
  6,096
  6,443
  6,818
  7,221
  7,653
  8,116
  8,612
  9,140
  9,704
  10,303
  10,941
  11,619
  12,338
  13,102
  13,911
  14,768
  15,675
  16,635
Issuance/(repayment) of debt, $m
  592
  668
  754
  839
  924
  1,008
  1,094
  1,180
  1,268
  1,358
  1,450
  1,545
  1,643
  1,744
  1,849
  1,958
  2,072
  2,190
  2,313
  2,441
  2,574
  2,714
  2,860
  3,012
  3,172
  3,339
  3,514
  3,697
  3,889
  4,090
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  592
  668
  754
  839
  924
  1,008
  1,094
  1,180
  1,268
  1,358
  1,450
  1,545
  1,643
  1,744
  1,849
  1,958
  2,072
  2,190
  2,313
  2,441
  2,574
  2,714
  2,860
  3,012
  3,172
  3,339
  3,514
  3,697
  3,889
  4,090
Total cash flow (excl. dividends), $m
  4,919
  5,049
  5,211
  5,396
  5,606
  5,840
  6,098
  6,380
  6,689
  7,023
  6,932
  7,321
  7,740
  8,188
  8,667
  9,179
  9,725
  10,306
  10,924
  11,581
  12,278
  13,017
  13,801
  14,631
  15,511
  16,441
  17,425
  18,465
  19,564
  20,725
Retained Cash Flow (-), $m
  -311
  -337
  -380
  -423
  -465
  -508
  -551
  -594
  -639
  -684
  -731
  -778
  -828
  -879
  -932
  -987
  -1,044
  -1,103
  -1,165
  -1,229
  -1,297
  -1,367
  -1,441
  -1,518
  -1,598
  -1,682
  -1,770
  -1,863
  -1,959
  -2,060
Prev. year cash balance distribution, $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 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
  4,608
  4,712
  4,831
  4,974
  5,141
  5,332
  5,547
  5,786
  6,050
  6,339
  6,201
  6,543
  6,912
  7,309
  7,736
  8,192
  8,681
  9,203
  9,759
  10,351
  10,981
  11,650
  12,360
  13,114
  13,913
  14,759
  15,654
  16,602
  17,605
  18,665
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  4,356
  4,187
  4,011
  3,835
  3,657
  3,473
  3,284
  3,089
  2,887
  2,678
  2,297
  2,103
  1,906
  1,709
  1,515
  1,325
  1,144
  973
  815
  671
  543
  432
  336
  256
  191
  139
  99
  69
  46
  30
Current shareholders' claim on cash, %
  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

Diageo PLC is an alcoholic beverage company. The Company operates in various categories, including spirits and beer. Its geographic segments include North America; Europe, Russia and Turkey; Africa; Latin America and Caribbean, and Asia Pacific. Its principal products includes Scotch whisky, Gin, Vodka, Rum, Beer, Irish Cream Liqueur, Wine, Raki, Tequila, Canadian Whisky, American Whiskey, Progressive Adult Beverages, Cachaca, Brandy and Ready to Drink. The Company's brands includes Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness. It manages its operations from various locations, including the United Kingdom; Ireland; Italy; Turkey; the United States; Canada; Brazil; Mexico; Australia; Singapore; India; Nigeria; South Africa; East Africa, and Africa Regional Markets. It also produces a range of ready to drink products mainly in the United Kingdom, Italy, South Africa, Australia, the United States and Canada.

FINANCIAL RATIOS  of  Diageo plc (DEO)

Valuation Ratios
P/E Ratio 134
Price to Sales 29.6
Price to Book 34.6
Price to Tangible Book
Price to Cash Flow 113.8
Price to Free Cash Flow 136.4
Growth Rates
Sales Growth Rate 14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.4%
Cap. Spend. - 3 Yr. Gr. Rate -4.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 65.4%
Total Debt to Equity 89.4%
Interest Coverage 8
Management Effectiveness
Return On Assets 10.6%
Ret/ On Assets - 3 Yr. Avg. 10.7%
Return On Total Capital 13.8%
Ret/ On T. Cap. - 3 Yr. Avg. 13.3%
Return On Equity 28.3%
Return On Equity - 3 Yr. Avg. 29.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 61.2%
Gross Margin - 3 Yr. Avg. 59.4%
EBITDA Margin 36.6%
EBITDA Margin - 3 Yr. Avg. 36.6%
Operating Margin 29.7%
Oper. Margin - 3 Yr. Avg. 29.1%
Pre-Tax Margin 29.5%
Pre-Tax Margin - 3 Yr. Avg. 28%
Net Profit Margin 22.1%
Net Profit Margin - 3 Yr. Avg. 21.8%
Effective Tax Rate 20.6%
Eff/ Tax Rate - 3 Yr. Avg. 17.9%
Payout Ratio 56.9%

DEO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DEO stock intrinsic value calculation we used $16217 million for the last fiscal year's total revenue generated by Diageo plc. The default revenue input number comes from 0001 income statement of Diageo plc. 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 DEO stock valuation model: a) initial revenue growth rate of 2.2% 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 5.8%, whose default value for DEO is calculated based on our internal credit rating of Diageo plc, 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 Diageo plc.
    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 DEO stock the variable cost ratio is equal to 32%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6249 million in the base year in the intrinsic value calculation for DEO 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 5.4% for Diageo plc.

Corporate tax rate of 27% is the nominal tax rate for Diageo plc. 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 DEO 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 DEO are equal to 84.5%.

Life of production assets of 33.5 years is the average useful life of capital assets used in Diageo plc 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 DEO is equal to 28.6%. 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 - $13264 million for Diageo plc - 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 602.597 million for Diageo plc 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 Diageo plc at the current share price and the inputted number of shares is $103.8 billion.

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