Does PepsiCo’s Recent Rebound Signal a Bargain for Investors in 2025?

• Curious whether PepsiCo is actually a bargain, or if the stock’s price tag is starting to outpace its value? You’re not alone, and digging into its valuation might reveal some insightful surprises.
• Despite a year-to-date dip of 0.5% and a 4.8% slide over the last twelve months, PepsiCo shares have rebounded with a 2.8% gain this past week, hinting at renewed optimism from investors.
• One reason behind these movements is heightened analyst attention, as PepsiCo's diversified snack and beverage portfolio continues to weather shifting consumer trends. Headlines have highlighted new product launches and expanding sustainability efforts, which may be influencing renewed market confidence.
• PepsiCo currently scores a 2 out of 6 on our valuation checks, suggesting it only looks undervalued in a couple of key areas. Next, we’ll dig deeper into what this score means and which classic valuation methods matter most. We will also explore a smarter way to understand the real worth of PepsiCo at the end of this article.

PepsiCo scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: PepsiCo Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and bringing those figures back to today's value using a discount rate. This method helps investors gauge whether a stock is trading above or below its calculated worth based on expected cash generation.

For PepsiCo, current free cash flow stands at $6.4 Billion. Analysts forecast this figure to grow each year, with the company expected to produce about $13.7 Billion in free cash flow in 2029. Since only five years of analyst estimates are available, projections for years beyond 2029 have been extrapolated by Simply Wall St, reaching $17.05 Billion by 2035, all in USD.

Based on the 2-Stage Free Cash Flow to Equity model, PepsiCo’s estimated intrinsic value is $246.92 per share. The DCF calculation suggests that the stock is trading at a 39.5% discount to its fair value. This implies it may be notably undervalued at current prices.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests PepsiCo is undervalued by 39.5%. Track this in your watchlist or portfolio, or discover 923 more undervalued stocks based on cash flows.

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

Approach 2: PepsiCo Price vs Earnings

For profitable companies like PepsiCo, the price-to-earnings (PE) ratio is a widely used metric to judge whether the stock’s price reflects its underlying performance. Since PepsiCo consistently generates positive earnings, the PE ratio helps investors weigh its current price against its profit-making ability.

What is considered a “fair” PE ratio varies, as it factors in an investor’s expectations for future growth and the perceived risks. Higher growth prospects or lower risk often justify a higher multiple, while slower growth or elevated risk can pull it down.

PepsiCo’s current PE ratio is 28.6x. This is above both the broader beverage industry average of 18.0x and the average for similar peers at 26.3x. On the surface, this could make the stock look a bit pricey compared to competitors.

However, Simply Wall St’s proprietary Fair Ratio for PepsiCo stands at 27.0x. This metric factors in the company’s earnings growth, industry position, profit margin, market cap, and risk profile, offering a more personalized benchmark than industry or peer averages alone.

Comparing PepsiCo’s actual PE ratio (28.6x) to its Fair Ratio (27.0x) suggests the stock is trading just a little above its specially calculated fair value. The difference is modest, so PepsiCo appears just slightly overvalued on this measure.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your PepsiCo Narrative

Earlier we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, intuitive investment story that represents your perspective and connects why you believe PepsiCo is worth a certain amount to your own forecasts for its future revenue, profit, and profit margin. Narratives go beyond ratios and models, letting you articulate what you expect from a company and then see how your assumptions translate into a fair value.

This approach links PepsiCo’s business story directly to a financial forecast and ultimately to the estimated fair value. It makes it easier to see how changing assumptions or new information impacts your investment case. Available on Simply Wall St's Community page, Narratives are a popular, accessible tool used by millions of investors to compare estimates and make dynamic buy or sell decisions as situations evolve.

Narratives are updated automatically when fresh news or earnings are released, ensuring your view always reflects the latest data. For PepsiCo, for example, one investor’s Narrative might assume modest 2% revenue growth and a fair value of $160, while another expects 3.5% annual growth and values the stock closer to $175. This highlights how the story you believe drives your own unique valuation.

Do you think there's more to the story for PepsiCo? Head over to our Community to see what others are saying!

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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