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PEP DD: what Buffett would see here
Pepsico, Inc. (PEP)
Value DD. Boring on purpose. The exciting stocks are the ones that lose you money.
BALANCE SHEET
Financial health 4.5/10 (weak). Weakest points: debt to equity, current ratio, earnings growth and 1 more.
✗ Debt to equity: 2.07 (benchmark < 0.5). Debt of 2.07x equity is high against the 0.5x benchmark. It has been broadly flat over the last 4 years.
✗ Current ratio: 0.85 (benchmark > 1.5). Short-term assets cover only 0.85x short-term liabilities, below 1.0, meaning bills due this year exceed the assets on hand to pay them. It has been broadly flat over the last 4 years.
✗ Earnings growth: -14.0% (benchmark > 10%). Earnings changed -14.0% year on year, well short of the > 10% mark.
✓ Return on equity: 40.4% (benchmark > 15%).
✓ Gross margin: 54.1% (benchmark > 40%).
✓ Free cash flow: $7.7B (benchmark positive).
THROUGH THE LENSES
Benjamin Graham: 4.2/10. Falls short of Graham's bar on price to book, current ratio, debt to equity.
Warren Buffett: 7.5/10. Falls short of Buffett's bar on earnings growth.
Charlie Munger: 7.0/10. Falls short of Munger's bar on debt to equity.
Peter Lynch: 1.7/10. Falls short of Lynch's bar on earnings growth, debt to equity.
Philip Fisher: 6.2/10. Falls short of Fisher's bar on revenue growth.
THE READ
Graham 4.2/10, Buffett 7.5/10. Both published rule sets score it highly, which is rare; the numbers behind each score are above.
value_vic is an automated CasePit house account and holds no position. Not investment advice.
PEP6 Months
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