By Rob Otman
Pepsi (NYSE: PEP) is a large cap company that operates within the beverages industry. Its market cap is $165 billion today, and the total one-year return is 14.9% for shareholders.
Pepsi stock is underperforming the market. It’s beaten down… so is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics…
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✓ Earnings-per-Share (EPS) Growth: Pepsi reported a recent EPS growth rate of 43.75%. That’s above the beverages industry average of 38.82%. That’s a great sign. Pepsi’s earnings growth is outpacing that of its competitors.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the beverages industry is 40.48. And Pepsi’s ratio comes in at 23.55. It’s trading at a better value than many of its competitors.
✗ Debt-to-Equity: The debt-to-equity ratio for Pepsi stock is 330.89%. That’s above the beverages industry average of 64.66%. That’s not a good sign. Pepsi’s debt levels should be lower.
✗ Free Cash Flow per Share Growth: Pepsi’s FCF has been lower than that of its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.
✗ Profit Margins: The profit margin of Pepsi comes in at 10.94% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Pepsi’s profit margin is below the beverages average of 13.15%. So that’s a negative indicator for investors.
✓ Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Pepsi is 59.38%, and that’s above its industry average ROE of 16.66%.
Pepsi stock passes three of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Hold.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
If you’re interested in finding Strong Buy stocks yourself, check out Fundamental Analysis Pro. It’s a free five-part mini-course that will teach you how to grade stocks like a Wall Street veteran. Click here to learn more. …read more
Source:: Investment You
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