DEO
Diageo plc
$86.06
Stable Earnings Power
80%
P/Adj-EPS × Normalized Multiple
Moderate
·
Conviction
Undervalued
Trading 36.3% below fair value
You pay
$86.06
Bear
$115.74
Fair
$135.03
Bull
$154.32
Bear
$115.74
+34.5%
$6.12 × 19x P/E
Fair
$135.03
+56.9%
$6.12 × 22x P/E
Bull
$154.32
+79.3%
$6.12 × 25x P/E
Adjust Assumptions
22.1x
6.12$
Key Value Driver
Normalized P/E multiple (22x base case)
Implied Market Multiple
14.1x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (37 analysts)
$99.00
Divergence from AlphaVal
36%
Summary
Applying a 22x P/E to adjusted EPS of $6.12, the base-case value is $135.03 per share.
Warnings
The company's reported profits differ from official accounting profits by 96%. Check what costs are being left out of the adjusted number.
The company pays out 197% 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 36% 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