Has Dr Pepper’s Recent 7% Rally Created a New Opportunity for Investors in 2025?

Okay, you have Keurig Dr Pepper shares or you’re thinking about picking some up. Maybe you’ve seen the price tick up 7.2% this last week after a months-long slide, or you’re puzzled by the stock still sitting more than 21% lower than a year ago. It’s fair to wonder: should you buy, hold, or wait it out?

Stocks like Keurig Dr Pepper are rarely boring for long. While broader market sentiment has bounced between optimism and caution, beverage makers like this one have mostly flown under the radar, even when shifts in consumer habits or distribution strategies ripple through the industry. The steady five-year gain of just 5.9% might not turn heads, but more recent moves hint that something may be brewing below the surface.

Here is what’s particularly interesting: when breaking down Keurig Dr Pepper’s value across six major checks analysts use to spot bargains, the company scores a 5 out of 6 on the undervalued scale. In other words, it passes nearly every test for being priced below its intrinsic worth, something most companies struggle to achieve.

So, what are those valuation checks and do they really mean you’re getting a bargain? Let’s explore how traditional methods shed light on the company’s current stock price. Stick with me, because by the end of this article, I’ll share a perspective on valuation you might not have considered.

Why Keurig Dr Pepper is lagging behind its peers

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

The Discounted Cash Flow, or DCF, model estimates what a company’s shares are worth today by projecting how much cash the company is likely to generate in the future and then discounting those cash flows back to the present. Essentially, it translates tomorrow’s potential into today’s dollar value.

For Keurig Dr Pepper, the latest DCF analysis starts with its most recent Free Cash Flow of $1.59 billion. Analyst estimates suggest that cash flows will continue to grow each year, with projections reaching $3.55 billion by 2029. Only the first five years are directly forecasted by analysts. Later years are extrapolated based on reasonable long-term growth rates. This incremental growth is mapped out in the model to offer a full picture of expected performance through 2035.

After crunching the numbers and applying sensible discount rates to reflect risk and the time value of money, the DCF method arrives at an intrinsic value of $64.99 per share. At current market prices, this suggests the stock is trading at a 57.4% discount to its intrinsic value. In other words, shares look significantly undervalued compared to what future cash flows may justify.

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 57.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Keurig Dr Pepper Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used tool for valuing profitable companies like Keurig Dr Pepper. As a measure reflecting how much investors are willing to pay today for each dollar of future earnings, it is particularly meaningful when a company has consistent profits. For established businesses, a reasonable PE ratio not only accounts for current profitability but also considers future growth prospects and risk factors. Higher growth expectations may justify a premium, while elevated risks could warrant a discount.

Keurig Dr Pepper currently trades at a PE ratio of 24.5x. This is notably above the beverage industry average of 17.7x and lower than the peer group average of 62.5x. While comparing these benchmarks is helpful, it does not account for the company’s future growth, specific risks, profit margins, or size.

This is where Simply Wall St’s "Fair Ratio" comes in. The Fair Ratio, at 29.7x for Keurig Dr Pepper, represents a tailored multiple that factors in not just peer and industry comparisons but also adjusts for the company’s forecast earnings growth, business risks, profit margins, and overall market capitalization. By using this metric, investors get a more nuanced and precise read on valuation than industry averages alone provide.

Given that Keurig Dr Pepper’s actual PE of 24.5x is below its Fair Ratio of 29.7x, the stock currently appears undervalued using this approach.

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 mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personalized story about a company. It captures the reasons behind your assumptions for fair value and what you believe about its future revenue, earnings, and margins. Instead of just relying on static metrics, a Narrative connects your perspective on Keurig Dr Pepper to a full financial forecast and then translates that into a fair value estimate.

Narratives make smarter investing accessible for everyone. On Simply Wall St's Community page, millions of investors use Narratives to clarify the connection between a company’s strategy, industry trends, and financial outlook. With Narratives, you can easily test different scenarios by deciding whether it is time to buy, hold, or sell through a direct comparison of your fair value to the current market price. These Narratives update in real time when earnings reports, news, or new market data are released, keeping your analysis fresh and timely.

For example, on Keurig Dr Pepper, one investor with a bullish Narrative expects share prices to hit $42.00 as energy drinks and international sales expand, while a more cautious approach values the stock at just $30.00, factoring in ongoing coffee segment challenges and market risks.

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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