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PepsiCo, Inc. (PEP) Intrinsic Value

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

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PepsiCo, Inc. (PEP)

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Intrinsic Value (DCF)

Current$143.48
→
Intrinsic$75.75
-47%
$42.23$75.75$142.46
Market implies 21% growth for 5 years
Current price reflects execution expectations above 8% growth — not unreasonable for quality businesses.
At $143, the market prices in continued strong cash flow growth (21%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $42 → Bull $142. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →4%6%8%10%
8%$98$110$122$135
10%$60$68$76$85
12%$39$45$51$58
14%$27$31$36$41

Bull Case

  • Bull case ($142) with 10% growth, 8% discount rate
  • Conservative 8% growth assumption is achievable based on track record

Bear Case

  • Bear case ($42) implies 71% downside at 6% growth, 12% discount
  • Price reflects 21% growth expectations vs 8% historical — high bar to clear
  • Trading 47% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$7.76B
Year 2$8.39B
Year 3$9.06B
Year 4$9.78B
Year 5$10.56B
Terminal$167.38B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$7.19BTTM 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.

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Frequently Asked Questions

Is PEP stock undervalued or overvalued?
🔴 OVERVALUED

PEP trades at $143.48 vs. our DCF-derived intrinsic value of $75.75, implying -45% downside. Using a 9.5% WACC and 8.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($116.49) suggests limited upside.

What is PEP's intrinsic value?

Using a 5-year DCF model: Base FCF of $7.19B, projected at 8.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $36.44B net debt and dividing by 1.38B shares: Bear $46.29 | Base $75.75 | Bull $116.49. Current price $143.48 implies -45% to base case.

How is PEP's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% 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=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($140.82B).

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: 19.6x.