Diageo (LSE:DGE): Is the Drinks Giant Undervalued After Recent Share Price Movement?

Diageo (LSE:DGE) shares have shown some movement recently, drawing attention from investors who are tracking its performance after a period of mixed returns over the past few months. Many are weighing the longer-term outlook.

See our latest analysis for Diageo.

This year has seen Diageo’s share price lose almost 30%, with recent weeks showing a modest bounce but not enough to reverse the steeper declines from earlier in 2024. The 1-year total shareholder return sits at -18.8%, which underscores that momentum remains muted as investors continue to weigh a mix of growth concerns and evolving risks.

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With the share price well below analyst targets and recent results mixed, is Diageo currently undervalued? Or is the market already factoring in all of its future prospects, leaving little room for upside?

Most Popular Narrative: 23.5% Undervalued

With the current share price at £17.98 and the most widely followed narrative placing fair value at £23.48, there is a striking gap that puts the latest valuation debate in the spotlight.

Diageo is intensifying its focus on premiumization and category expansion (notably in tequila and ready-to-drink beverages) to capture rising consumer affluence and elevated brand preferences in both emerging and developed markets. This supports future revenue growth and gross margin expansion. The company is executing a multiyear overhaul to deepen locally tailored, occasion-led marketing and distribution strategies across key regions (Europe, Asia-Pacific, and Africa). It is positioning itself to leverage demographic shifts such as urbanization and a growing legal drinking-age population, which are expected to drive volume and sales momentum over the long term.

Read the complete narrative.

Curious about how bold expansion plans and shifting market demographics are baked into the narrative’s optimistic price? The real catalyst behind this valuation involves margin enhancements, targeted growth, and changing industry dynamics. The numbers driving this target might surprise you. Find out what’s underpinning such a confident fair value.

Result: Fair Value of £23.48 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent moderation trends among younger consumers and tighter regulations could quickly erode long-term revenue growth and present challenges to current margin forecasts.

Find out about the key risks to this Diageo narrative.

Build Your Own Diageo Narrative

If you see things differently or want to dig deeper into the numbers, you can craft your own perspective in just a few minutes. Do it your way.

A great starting point for your Diageo research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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