PepsiCo INC , Analysis of Revenue ,growth perspective and Free Cashflow to Equity(FCFE)

 

About PepsiCo Inc.

PepsiCo Inc. is a leading global beverage and convenient food company with a complementary portfolio of brands, including Lay s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream.

Food business is 59% of total revenue and beverage business is 41% of total revenue.

PepsiCo INC showed very good progress across geographies, with organic revenue up 8% in North America, 12% in International business, 10% in Global Convenient Foods business, and 8% in Global Beverages business.

PepsiCo Inc. incorporated in Delaware in 1919 and reincorporated in North Carolina in 1986Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories.

Company put PepsiCo Positive (pep+) at the center of all that they do, transforming the business from end-to-end to drive sustainable performance and value that positively impacts the planet and communities.

 

During the year 2023 PepsiCo Inc, reported 39% increase in Free Cashflow.

Net Revenue is increased by 6%, while Operating margin is increased by 13.1%.

 

FCFE Details of PEPSICO INC shown below, US$ in millions, except per share data, based on values on 10/09/2024

Year	Value	FCFE or Terminal Value	Present Value at 9.46%
0	FCFE0	12,805	12,805
1	FCFE1	14,429 = 12805 x (1+12.69%)	12,805
2	FCFE2	15,939 = 14429 x (1+ 10.46%)	13,064
3	FCFE3	17,251 = 15939 x (1+ 8.23%)	13,607
4	FCFE4	18,286 = 17251x (1+6%)	14,484
5	FCFE5	18,973= 18286 x (1+3.76%)	15,776
5	Terminal Value (TV5)	345,389 = 14,013 x (1+8.22%) / (9.46% - 8.22%)	219,801

Intrinsic value of PepsiCo INC	$302,343
Market cap of PEPSICO INC.	$2.36 Billion
Intrinsic value of PepsiCo INC. common stock (per share)	$251.19
Current share price on 10/09/2024	$170.42

 

Required rate of Return

Assumptions

Rate of return on LT Treasury Composite(Rf)	4.36%
Expected rate of return on market portfolio(E(RM)	13.81%
Systematic risk of Intuit Inc. Common stock (β)	0.54
Required rate of return on Intuit Inc. Common Stock (r) Calculation : Rf + β(E(RM)- (Rf) = 4.36% +0.54[13.81% - 4.36%]	9.46%

 

FCFE Growth rate (G) Forecast

PEPSICO INC. H-Model

Year	Value	g
1	g1 (PRAT Model)	12.69%
2	g2 (Linear Interpolation)	10.46%
3	g3 (Linear Interpolation)	8.23%
4	g4 (Linear Interpolation)	6%
5	g5 (Single stage model)	3.76%

 

2023 Calculations

Retention rate = (Net income Dividends on common stock) Net income

= (9074 - 6839) / 9074

= 24.63%

 

Profit margin = 100 X Net income / Revenue

= 100 X 9074 / 91471

= 10%

 

Asset turnover = Revenue / Total assets

= 91471 / 100495

= 0.91

 

Financial leverage = Total Assets / Stockholders equity

= 100495 / 18,503

= 5.43

 

 

 

 

Sources :Form 10K of PEPSICO INC for the fiscal year 2023, https://www.pepsico.com/investors/financial-information/annual-reports-proxy-information, https://www.stock-analysis-on.net/ , https://finance.yahoo.com/ ,https://companiesmarketcap.com/