PepsiCo (PEP): Valuation in Focus Following Analyst Upgrade and Increased Shareholder Return Plans

DZ Bank's recent upgrade of PepsiCo (PEP) from Hold to Buy comes after the company reported strong third-quarter results and announced plans to distribute approximately $8.6 billion to shareholders through dividends and share repurchases in 2025.

See our latest analysis for PepsiCo.

PepsiCo’s latest upgrade follows a stretch where its share price has lagged behind broader market enthusiasm, posting a year-to-date return of -5.05%. Over the past year, total shareholder return sits at -9.86%, underscoring fading momentum even as the company reinforces its commitment to shareholder cash returns and steady dividend growth. For long-term holders, the five-year TSR of 14.27% is still respectable, highlighting resilience despite recent volatility and renewed analyst optimism.

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Given the company’s reliable dividends, analyst upgrades, and strong cash returns, investors may wonder whether PepsiCo is currently undervalued or if future growth prospects are already fully priced into the stock.

Most Popular Narrative: 6.5% Undervalued

Compared to the last close price of $142.62, the most widely followed narrative suggests PepsiCo’s fair value sits at $152.57. This view reflects expectations that the company’s earnings growth, margin expansion, and international reach can soon outpace recent share price trends.

"Sustained investment and strategic focus on international expansion, particularly in emerging markets (e.g., India, LatAm, Middle East), is broadening PepsiCo's addressable market and driving faster, margin-accretive revenue growth. This positions the company to benefit from population growth and rising disposable incomes. (Expected impact: Top-line revenue and geographic diversification.)"

Read the complete narrative.

Curious which financial levers are powering this target? Analysts are betting on rising profits and stronger margins, but there is one assumption in the forecast that could make all the difference. Only a full read reveals the pivotal factors shaping these bold expectations.

Result: Fair Value of $152.57 (UNDERVALUED)

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

However, slow consumer adoption of healthier products and continued cost pressures could challenge PepsiCo’s upbeat outlook and may limit future growth momentum.

Find out about the key risks to this PepsiCo narrative.

Another View: Price Multiples Suggest a Premium

While the analyst consensus points to PepsiCo trading near fair value based on future profits, a look at its price-to-earnings ratio tells a different story. PepsiCo’s P/E is currently 27x, which is above both its global industry average of 17.9x and the peer group average of 25x. Compared to a fair ratio of 26.7x, this means the stock is priced at a noticeable premium, introducing valuation risk if market expectations change. Could this mark cautious optimism or signal overheating?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own PepsiCo Narrative

If these perspectives don’t quite match your own outlook or you want to dig into the numbers firsthand, it’s quick and easy to step through the data and build a narrative that fits your view. Do it your way

A great starting point for your PepsiCo research is our analysis highlighting 2 key rewards and 3 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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