PepsiCo, Inc. (PEP)

Discount cash flow analysis

5% margin of safety What's this?

Within margin of safety Undervalued by 2.4%

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How does this work?

This is an interactive analyst report for PepsiCo, Inc., based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2007 2008 2009 2010 2011 2012 2013 2014
 
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What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Price history

Sensitivity matrix

   
-1% 		Discount Rate %
0%
1%
  -1% $67.31 $66.13 $64.98
Terminal Growth% 0 $67.83 $66.63 $65.47
  +1% $68.36 $67.14 $65.96

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of $71.35 (undervalued by 9.6%) - 6 hours ago
  • GordonGekko created a new valuation of $53.30 (undervalued by 2.24%) - 11 months ago
  • SethWellbourne created a new valuation of $41.04 (overvalued by 20.76%) - 11 months ago
  • jtmoney15 created a new valuation of $46.29 (overvalued by 5.01%) - 12 months ago
  • TheCrunchBlog created a new valuation of $48.01 (overvalued by 10.5%) - 1 year ago
  • GordonGekko created a new valuation of $66.63 (overvalued by 2.7%) - 1 year ago

Comments

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The boring details

All amounts in millions Figures
Enterprise Value: 103,637
Net Debt (Long-term borrowings less cash): 1,722
Equity Value: 107,206
Number of Shares Outstanding: 1,565,000,000
Calculated value per share: $66.63

Enterprise Value is the present value of the post-tax cash flows for a business into the future.

Calcuation of EV

Where:

  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.

Perpetuity

Where:

  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.

CAPM model

Where:

  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.