Diageo plc
Diageo plc Fundamental Analysis
Diageo plc (DEO) shows moderate financial fundamentals with a PE ratio of 17.13, profit margin of 11.06%, and ROE of 19.27%. The company generates $17.2B in annual revenue with weak year-over-year growth of -0.12%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 41.2/100 based on profitability, valuation, growth, and balance sheet metrics. The D grade reflects weak fundamentals and significant financial concerns.
Fundamental Health Score
We analyze DEO's fundamental strength across five key dimensions:
Efficiency Score
WeakDEO struggles to generate sufficient returns from assets.
Valuation Score
ExcellentDEO trades at attractive valuation levels.
Growth Score
WeakDEO faces weak or negative growth trends.
Financial Health Score
ModerateDEO shows balanced financial health with some risks.
Profitability Score
ModerateDEO maintains healthy but balanced margins.
Key Financial Metrics
Is DEO Expensive or Cheap?
P/E Ratio
DEO trades at 17.13 times earnings. This indicates a fair valuation.
PEG Ratio
When adjusting for growth, DEO's PEG of -1.14 indicates potential undervaluation.
Price to Book
The market values Diageo plc at 3.78 times its book value. This suggests the stock is fully valued or overvalued on an asset basis.
EV/EBITDA
Enterprise value stands at 3.76 times EBITDA. This is generally considered low.
How Well Does DEO Make Money?
Net Profit Margin
For every $100 in sales, Diageo plc keeps $11.06 as profit after all expenses.
Operating Margin
Core operations generate 26.66 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $19.27 in profit for every $100 of shareholder equity.
ROA
Diageo plc generates $5.09 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Diageo plc produces operating cash flow of $3.58B, showing steady but balanced cash generation.
Free Cash Flow
Diageo plc generates strong free cash flow of $2.14B, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $3.84 in free cash annually.
FCF Yield
DEO converts 6.56% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
17.13
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
-1.14
vs 25 benchmark
P/B Ratio
Price to book value ratio
3.78
vs 25 benchmark
P/S Ratio
Price to sales ratio
1.89
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
2.09
vs 25 benchmark
Current Ratio
Current assets to current liabilities
1.60
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.19
vs 25 benchmark
ROA
Return on assets percentage
0.05
vs 25 benchmark
ROCE
Return on capital employed
0.16
vs 25 benchmark
How DEO Stacks Against Its Sector Peers
| Metric | DEO Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 17.13 | 22.53 | Better (Cheaper) |
| ROE | 19.27% | 1238.00% | Weak |
| Net Margin | 11.06% | -6235.00% (disorted) | Strong |
| Debt/Equity | 2.09 | 1.25 | Weak (High Leverage) |
| Current Ratio | 1.60 | 2.41 | Neutral |
| ROA | 5.09% | -157319.00% (disorted) | Weak |
DEO outperforms its industry in 2 out of 6 key metrics, particularly excelling in Net Margin, but lagging in ROE.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Diageo plc's 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
81.88%
Industry Style: Defensive, Dividend, Low Volatility
High GrowthEPS CAGR
43.30%
Industry Style: Defensive, Dividend, Low Volatility
High GrowthFCF CAGR
95.55%
Industry Style: Defensive, Dividend, Low Volatility
High Growth