Can the Recent Slide in Keurig Dr Pepper Shares Signal a Recovery Opportunity for 2025?

If you are debating what to do with Keurig Dr Pepper stock in your portfolio right now, you are in good company. The past year has tested patient investors, with the stock closing recently at $25.58 and notching a tough performance. Over the last 12 months, shares dropped 27.2%, taking the five-year return just shy of break-even at -2.7%. The slide this year is even sharper, with the stock off almost 20% since January as Wall Street’s risk appetite shifted and defensive names like KDP took a hit.

But with the negative sentiment priced in, opportunity can arise just when confidence is lowest. A modest pickup in consumer staples and renewed interest in diversified beverage brands could spark a turnaround. Some analysts argue that KDP is now out of favor, not because the business faces dire prospects, but largely because the broader market has been so focused on rate-sensitive growth stocks. This may give value-seekers a rare chance to look deeper.

That is where valuation comes in. By most metrics, Keurig Dr Pepper currently stacks up as undervalued. On our value scorecard, the company checks five out of six key boxes, earning a valuation score of 5. This alone is a strong sign there is more beneath the surface than headline returns suggest.

So, how does KDP measure up under the most common valuation approaches? Let’s break down the numbers you will want to know, and stay tuned, because we will close with an even sharper lens for judging whether KDP is truly a bargain today.

Why Keurig Dr Pepper is lagging behind its peers

Approach 1: Keurig Dr Pepper Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by estimating all the cash Keurig Dr Pepper is expected to generate in the future and then discounting those projections back to today's dollars. This gives investors an idea of the business’s intrinsic value right now, based on tangible cash flows rather than market sentiment.

Keurig Dr Pepper’s current Free Cash Flow stands at $1.59 Billion. Over the next five years, analysts forecast steady growth, with Free Cash Flow expected to rise to $3.55 Billion by the end of 2029. After analyst coverage ends, projections are extended based on recent trends and growth rates, indicating healthy progress for years beyond.

Applying the DCF model to these cash flows results in an estimated intrinsic value of $65 per share. Compared to the current share price of $25.58, the model suggests the stock is trading at a 60.6% discount to its fair value.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Keurig Dr Pepper.

Our Discounted Cash Flow (DCF) analysis suggests Keurig Dr Pepper is undervalued by 60.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Keurig Dr Pepper Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like Keurig Dr Pepper, as it compares a company’s current share price to its per-share earnings. This makes PE especially useful for businesses with reliable profitability, as it anchors valuation to demonstrated bottom-line performance.

Growth expectations and risk play a crucial role in determining what a normal or fair PE ratio should be. Fast-growing companies, or those with lower perceived risk, generally warrant higher PE ratios, whereas slower growth or higher risk justifies more modest multiples.

Currently, Keurig Dr Pepper’s PE ratio sits at 22.6x. That is higher than the beverage industry average of 18.0x, but notably lower than both the peer group average of 60.9x and the widely referenced “Fair Ratio” of 29.4x. The Fair Ratio, calculated by Simply Wall St, reflects not just industry context but also factors such as KDP’s earnings growth outlook, profit margin, size, and risk profile.

Using the Fair Ratio provides a more tailored benchmark for valuation rather than peers or industry averages alone, as it accounts for KDP’s unique mix of growth potential, profitability, and business stability. This allows investors to see beyond surface-level comparisons to determine if the stock is attractively priced for its fundamentals.

Since KDP’s current PE multiple of 22.6x is well below the Fair Ratio of 29.4x, the stock appears undervalued on this basis.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Keurig Dr Pepper Narrative

Earlier we alluded to a sharper way to evaluate fair value, so let’s introduce you to Narratives, a practical tool that turns investment analysis from just crunching numbers into telling an actionable story about a company’s future.

Simply put, a Narrative is your perspective on Keurig Dr Pepper’s journey, connecting the company’s business outlook and catalysts with forecasts for revenue, earnings, and margins, ending in your own view of fair value. Narratives go beyond static models by letting you map your story to financial projections and instantly see how your assumptions compare to others in the investing community.

Narratives live on Simply Wall St's Community page, where millions of investors build, update, and discuss their insights. Because they link company stories and fresh data, such as news or earnings announcements, to updated valuations in real time, Narratives empower you to spot if the price on offer is above or below your estimated fair value and identify meaningful buy or sell moments as conditions change.

For Keurig Dr Pepper, some investors’ Narratives see growth driven by iconic brands and successful energy integration (with bullish targets as high as $42), while others are more cautious, emphasizing coffee segment headwinds or execution risk (with lower targets around $30), reflecting just how dynamic these stories and the investment opportunities can be.

Do you think there's more to the story for Keurig Dr Pepper? Create your own Narrative to let the Community know!

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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