...

Diageo plc (DEO) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

Popular:

Diageo plc (DEO)

View Full Profile →

Intrinsic Value (DCF)

Current$89.35
→
Intrinsic$61.11
-32%
$29.12$61.11$121.91
Market implies 18% growth for 5 years
Current price reflects execution expectations above 11% growth — not unreasonable for quality businesses.
At $89, the market prices in continued high-teens cash flow growth (18%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $29 → Bull $122. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →7%9%11%13%
8%$81$92$103$115
10%$46$53$61$70
12%$26$32$38$44
14%$14$18$23$28

Bull Case

  • Bull case ($122) offers 36% upside at 14% growth, 9% discount
  • Conservative 11% growth assumption is achievable based on track record

Bear Case

  • Bear case ($29) implies 67% downside at 9% growth, 12% discount
  • Price reflects 18% growth expectations vs 11% historical — high bar to clear
  • Trading 32% above base case — execution must exceed assumptions to justify
Loading charts...

5-Year Free Cash Flow Projection

Year 1$2.99B
Year 2$3.34B
Year 3$3.72B
Year 4$4.15B
Year 5$4.63B
Terminal$68.06B

📐 Model Inputs

Growth Rate11.5%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$2.69BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

Related Analysis

Full Stock ProfileCompare DEO vs AAPLStock Screener

Frequently Asked Questions

Is DEO stock undervalued or overvalued?
🔴 OVERVALUED

DEO trades at $89.35 vs. our DCF-derived intrinsic value of $61.11, implying -31% downside. Using a 10.0% WACC and 11.5% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($102.54) suggests limited upside.

What is DEO's intrinsic value?

Using a 5-year DCF model: Base FCF of $2.69B, projected at 11.5% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $22.20B net debt and dividing by 0.56B shares: Bear $31.08 | Base $61.11 | Bull $102.54. Current price $89.35 implies -31% to base case.

How is DEO's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 11.5% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($56.24B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 20.9x.