PepsiCo, Inc. (PEP): investment thesis checklist
What a value investor writing down why they own PepsiCo, Inc. would be relying on, read from its filings: the figures that have carried the business, the lines a reader might set on them, and the published tests it meets today. A list to write against, not a view on the company.
1. The figures the case would rest on
- Return on invested capital: 14.5% in FY2025; between 14.5% and 18.9% over 7 filed years, median 17.2%. Does the thesis need it to stay inside that range?
- Return on equity: 40.4% in FY2025; between 40.4% and 86.2% over 10 filed years, median 50.7%. Does the thesis need it to stay inside that range?
- Free cash flow yield: 3.9% in FY2025; between 2.2% and 5.0% over 10 filed years, median 3.4%. Does the thesis need it to stay inside that range?
- EV to EBIT: 20.98x in FY2025; between 17.89x and 24.94x over 8 filed years, median 22.13x. Does the thesis need it to stay inside that range?
- Price to earnings: 23.96x in FY2025; between 12.57x and 35.48x over 10 filed years, median 26.17x. Does the thesis need it to stay inside that range?
- Gross margin: 54.1% in FY2025; between 53.0% and 55.1% over 10 filed years, median 54.6%. Does the thesis need it to stay inside that range?
- Operating margin: 12.2% in FY2025; between 12.2% and 16.2% over 10 filed years, median 14.2%. Does the thesis need it to stay inside that range?
- Net debt to EBITDA: 2.93x in FY2025; between 1.89x and 2.98x over 8 filed years, median 2.53x. Does the thesis need it to stay inside that range?
- Revenue growth, 5-year CAGR: 5.9% in FY2025; between -1.1% and 7.2% over 10 filed years, median 3.5%. Does the thesis need it to stay inside that range?
- Share count change: -0.4% in FY2025; between -2.2% and -0.1% over 10 filed years, median -0.6%. Does the thesis need it to stay inside that range?
2. What must stay true: guardrails a reader might set
Each line is drafted from PepsiCo, Inc.'s own current figure, never from a level we think a business should clear, and replayed over its filed years. They are a reader's to keep, edit or drop.
Debt to Equity stays at or below 3.25x
Today 2.6x. Replayed over 8 filed years, it would have broken in 1; most recently FY2020, at 3.41x (10-K, filed 2021-02-11).
Return on Invested Capital stays at or above 11.6%
Today 14.49%. This indicator depends on inputs (market price, multi-statement composites) whose history is not deep enough to re-derive it with the same formula as the live value, so no honest retro-test exists for it.
Dividend Rate stays at or above $5.86
Today $5.92. This indicator depends on inputs (market price, multi-statement composites) whose history is not deep enough to re-derive it with the same formula as the live value, so no honest retro-test exists for it.
3. What would break it
- A filed year in which debt to equity rose above 3.25x.
- A filed year in which return on invested capital fell below 11.6%.
- A filed year in which dividend rate fell below $5.86.
4. The published tests it meets today
Of 30 tests value investors published: 3 met, 27 not met, 0 we could not complete. Counts, never a score.
Meets: Gross margin, turnover (Robert Novy-Marx); ROIC at or above WACC; Cash-covered dividend.
What this cannot tell you
What the numbers say today, not the day one stops being true. The reasons are not written down.
An account adds
One email the night a number you wrote down breaks. Silence otherwise.
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How this is computedA computation on accounts filed with the SEC, not a recommendation and not advice. Past filings do not indicate future results. Risk disclaimer.