DEO
Diageo plc
$88.90
Stable Earnings Power
80%
P/Adj-EPS × Normalized Multiple
Moderate
·
Conviction
Undervalued
Trading 31.2% below fair value
You pay
$88.90
Bear
$110.80
Fair
$129.27
Bull
$147.73
Bear
$110.80
+24.6%
$5.77 × 21x P/E
Fair
$129.27
+45.4%
$5.77 × 25x P/E
Bull
$147.73
+66.2%
$5.77 × 28x P/E
Key Value Driver
Normalized P/E multiple (25x base case)
Implied Market Multiple
15.4x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $99.00 from 37 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $129.27 per share.
Warnings
The company's reported profits differ from official accounting profits by 36%. Check what costs are being left out of the adjusted number.
The company pays out 176% of its profits as dividends. That leaves little cushion — the dividend could be cut if business slows down.
Wall Street's average price target is $99.00 (from 37 analysts). Our estimate is 44% above the consensus -- consider that gap carefully.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples