What’s PepsiCo’s Valuation ahead of Fiscal 3Q17 Results?
12-month forward PE
As of September 27, PepsiCo (PEP) was trading at a 12-month forward PE (price-to-earnings) ratio of 20.9x. The company’s valuation multiple is down 2.5% since the announcement of its fiscal 2Q17 results in July 2017.
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Comparison with peers
PepsiCo and its nonalcoholic beverage peers are trading at higher valuation multiples than the S&P 500 Index (forward PE of 18.1x). As of September 27, PepsiCo was also trading at a higher valuation multiple than the 12-month forward PE of 20.4x of the S&P Consumer Staples Index.
The 12-month forward PE is computed by dividing a company’s current stock price by its estimated EPS (earnings per share) over the next 12 months. The forward PE is influenced by many factors and differs among companies based on growth expectations, risk-return profile, leverage, and several other aspects.
Analysts expect PepsiCo’s revenue to rise 1.4% to $63.7 billion in the full-year fiscal 2017. The company’s adjusted EPS is anticipated to rise 6.4% to $5.16 in fiscal 2017. A rise in commodity prices and adverse foreign currency movements are expected to adversely impact the company’s performance in fiscal 2017. However, higher pricing and the company’s productivity initiatives are expected to positively impact the company’s bottom line.
We’ll look at analysts’ recommendations for PepsiCo’s stock in the next part of this series.