What Is Going On With PepsiCo Stock?
PepsiCo (PEP) stock trades at 16.1 times earnings. The median S&P 500 company, by contrast, trades at 22.8 times earnings. Over the past year, PepsiCo shares lost 11.9%, while the S&P 500 returned 17.9%. This underperformance occurred even as the company posted higher sales, margins, and cash flow in the twelve months to September 5, 2026. The market is either overlooking an improving business, or accurately pricing a company with stalled growth. What does a buyer get at this price?
Image from PixabayWhat PepsiCo Shareholders Get At This Price
A buyer acquires a drinks and snacks business generating higher sales and expanding margins. Its two largest units, PepsiCo Beverages North America and PepsiCo Foods North America, accounted for $55.7 billion of PepsiCo’s $93.9 billion revenue in fiscal 2025.
During the twelve months to September 5, 2026, revenue reached $98.2 billion, up 6.4% from the twelve months before. The operating margin was 15.3%, landing 2.1 percentage points wider than a year earlier. PepsiCo successfully kept more of each dollar it sold.
Cash generation accelerated even further. Free cash flow reached $10.5 billion over those twelve months, up from $6.79 billion a year earlier. At the October 15 close, that cash flow equals 6.0% of PepsiCo’s market value, and the dividend alone yields 4.5%. On the latest twelve months alone, the current share price appears to be a bargain.
PepsiCo’s Faster Growth Is Recent, And Costs Are Rising
This recent expansion follows two years of largely stagnant performance. Revenue rose 0.3% in the twelve months to September 7, 2024. In the twelve months to September 6, 2025, it rose 0.5%. Across the three twelve-month periods, growth averaged 2.4%. The current stock price appears to reflect this longer-term pace rather than the performance of the latest year.
Profit growth is also facing pressure. In its October 8 release, management cut its guide for adjusted earnings per share growth in fiscal 2026 to 2.5% to 3.5%, down from the low end of a 5% to 7% range in July. During the fiscal Q3 2026 call, management said margins were behind the cut, noting that input costs are trending higher and the hedges that had shielded PepsiCo from some costs are starting to roll off. A buyer at today’s price is paying for a strong year from a company now expecting slower profit growth.
How Much PepsiCo Expects To Grow In Fiscal 2026
Management expects sales to stay robust as the company absorbs those costs. It now expects fiscal 2026 net revenue growth of about 6%, the top of its earlier 4% to 6% range. Half of that growth, however, comes from outside the existing business. Currency and acquisitions net of divestitures each add 1.5 points to that figure. Growth from the existing business, which PepsiCo calls organic, is now guided at about 3%, narrowed from a 2% to 4% range.
This growth remains uneven. Management called fiscal Q3 2026 a stellar quarter for the international business, where organic revenue rose 8%. In North America, management noted the foods business improved from fiscal Q2, while the beverage business slowed.
Buying at this level is a wager that management can restore profit growth despite rising input costs, rather than just a bet on a discounted stock price for a business earning more than before. PepsiCo’s adjusted earnings per share growth for fiscal 2026, measured against the guide management cut in October, is the crucial metric to watch in the next report, expected in early February 2027.
Does This Mean You Should Act On PEP?
Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.
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