PepsiCo, Inc. (PEP) Intrinsic Value & DCF Valuation
Beverages - Non-Alcoholic · NASDAQ
Current Price
$123.73
Intrinsic Value
$122.33
-1.1% margin of safety
What Is PepsiCo, Inc.'s Intrinsic Value?
As of 2026-10-07, the base-case DCF model estimates the intrinsic value of PepsiCo, Inc. (PEP) at $122.33 per share, compared with a market price of $123.73, a margin of safety of -1.1%. The base case assumes 4.1% annual free cash flow growth and a 10.0% discount rate.
Across the sensitivity grid the estimate spans $98.29 to $150.07. Intrinsic value is an estimate built on assumptions, not a fact. A higher discount rate or slower growth pushes the estimate down, while stronger cash flow growth lifts it.
How the DCF works · Recalculate with your own assumptions · What is intrinsic value?
Is PepsiCo, Inc. (PEP) Undervalued?
At $123.73, PEP trades about 1.1% above the base-case intrinsic value estimate, a modest premium. By this model the price sits within a normal band, though faster growth than assumed would change the picture.
COMPETITIVE MOAT
↑Powerful Brand Recognition
PepsiCo's iconic brands like Pepsi, Lay's, and Gatorade possess strong consumer loyalty. This allows for premium pricing and consistent demand across diverse product categories.
↑Extensive Distribution Network
A vast and efficient global distribution system ensures widespread product availability. This creates significant barriers to entry for smaller competitors seeking similar reach.
↑Economies of Scale
Massive production volumes lead to lower per-unit costs in manufacturing and procurement. This cost advantage is difficult for rivals to replicate, enhancing profitability.
INVESTMENT RISKS
↓Regulatory Scrutiny on Health
Increased government regulations and taxes on sugary beverages could impact sales volumes and profitability. This may necessitate costly product adjustments.
↓Supply Chain Disruptions
Global supply chain volatility, including ingredient sourcing and transportation, can affect production costs and product availability. This poses a risk to consistent delivery.
↓Dependence on Key Markets
Over-reliance on specific geographic regions for a substantial portion of revenue creates vulnerability. Economic downturns or political instability in these areas could have a significant impact.
Base case
PEP base case valuation
Intrinsic Value
$122.33
Margin of safety
-1.1%
Expected annual return
-0.2%
Base case assumptions: 4.1% annual growth, 10.0% discount rate, 18.5x exit multiple, 5 year projection. Data as of 2026-10-07.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the PEP valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for PepsiCo, Inc. respond.
Open DCF Calculator for PEPCompany Overview
PepsiCo, Inc. is a global enterprise that creates, promotes, and supplies a diverse array of drinks and easy-to-prepare food items across the globe. Its operations are structured into seven primary divisions: Frito-Lay North America, Quaker Foods North America, PepsiCo Beverages North America, Latin America, Europe, Africa/Middle East/South Asia, and the Asia Pacific, Australia, New Zealand, and China Region. The company's extensive product catalog encompasses popular snack foods like various dips, cheese snacks, spreads, and a range of chips (including corn, potato, and tortilla varieties). Its pantry staples feature cereals, rice, pasta, baking mixes, beverage syrups, granola bars, grits, oatmeal, rice cakes, and ready-made side dishes. In the beverage sector, PepsiCo offers concentrated syrups, fountain beverages, pre-packaged drinks, ready-to-consume teas, coffees, fruit juices, dairy-based items, and home carbonation systems with associated goods. PepsiCo reaches its broad clientele, which includes wholesale partners, food service providers, various retail outlets like supermarkets, pharmacies, convenience shops, discount stores, large-format retailers, membership-based stores, hard discount retailers, online merchants, and approved independent bottlers. This widespread distribution is achieved via direct store delivery, customer warehouse systems, and comprehensive distributor networks, along with direct sales to consumers through digital commerce channels and retail partners. Established in 1898, the corporation maintains its principal office in Purchase, New York.
Financial Metrics — PEP Stock Valuation Data
Revenue/Share (TTM)
$70.94
FCF/Share (TTM)
$6.80
ROIC (TTM)
13.2%
ROE (TTM)
50.4%
P/FCF
18.2x
EV/EBITDA
11.5x
FCF Yield
5.41%
Debt/Equity
2.41x
On a trailing twelve-month basis, PEP generates free cash flow per share of $6.80 alongside a ROIC of 13.2%, both central inputs for a DCF valuation. Its P/FCF ratio of 18.2x and FCF yield of 5.41% then frame how PEP is priced against peers on a cash flow basis.
Frequently Asked Questions
What is the intrinsic value of PEP?
PepsiCo, Inc. currently generates $6.80 in free cash flow per share. At the current price of $123.73, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is PEP undervalued?
PEP trades at a P/FCF ratio of 18.2x with a free cash flow yield of 5.41%. This P/FCF is in a moderate range. However, whether PEP is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value PEP stock using DCF?
To perform a DCF valuation on PepsiCo, Inc.: (1) Start with the trailing free cash flow per share ($6.80) as the base, (2) project future FCF growth over 5-10 years based on Beverages - Non-Alcoholic industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting PEP's risk profile — with a debt-to-equity of 2.41x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to PEP?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For PepsiCo, Inc., this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Beverages - Non-Alcoholic trends, then discounting those amounts to today's dollars. PEP's ROIC of 13.2% shows moderate capital returns.
How does WACC affect PEP stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For PEP, with a debt-to-equity ratio of 2.41x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 11.5x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See PEP PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Consumer Defensive valuationsDCF and P/E value PEP with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2026-10-07. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.