Diageo (DEO:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Diageo(DEO:NYS)

Consumer Defensive:Beverages-Wineries & Distilleries

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
109.90 (GBP) / $142.00 (USD) 12/11/2018

Weighted Valuation
109.47 (GBP) / $141.44 (USD)

Use a conversion rate of 1.2920731 from GBP to USD.

Overall Rating
Fairly valued to slightly Overvalued by 0.4%

Valuation Models Analyst Consensus: 116.28 (GBP) / $150.24 (USD)
(in order of importance) Discounted Cash Flow: 102.80 (GBP) / $132.82 (USD)
Multiples: 102.39 (GBP) / $132.29 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (DEO:NYS USD)

Price 0.00
Range 0.00 – 0.00
52 week 0.00 – 0.00
Open 0.00
Vol / Avg. 0/0
Mkt cap 0
P/E 0.00
Div/yield 0.00/0.00
EPS 0.00
Shares 0
Beta 0.00

Company Description

The product of a merger between Grand Metropolitan and Guinness in 1997, Diageo is the world’s leading producer of branded premium spirits. It also produces and markets beer and wine. Brands include Johnnie Walker blended scotch, Smirnoff vodka, Crown Royal Canadian whiskey, Captain Morgan rum, Baileys Irish Cream, and Guinness stout. Diageo also owns 34% of premium champagne and cognac maker Moet Hennessy, a subsidiary of French luxury-goods maker LVMH Moet Hennessy-Louis Vuitton, and a near-55% stake in India’s United Spirits.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for DEO:NYS

Using a discounted cash flow model we generated an intrinsic value of 102.80 (GBP) / $132.82 (USD) for DEO:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

DEO:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $102.80 1% 5% 1% 5%
WACC (or Ke) 6.90 $132.44 $83.05
Terminal Growth Rate 1.90 $84.77 $129.85
Tax Rate 0.16 $110.23 $95.37
Cash Flow 5,206,988,100 $96.04 $109.56
Capital Expenditures -522,600,000 $102.18 $103.42
Long Term Debt 8,913,167,527 $103.53 $102.07

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of 159.63 (GBP) / $206.26 (USD) for DEO:NYS. We also generated a valuation of 153.56 (GBP) / $198.41 (USD) using other metrics and comparables.
The comparable companies were Brown-Forman (BF.B:NYS) and Constellation Brands (STZ.B:NYS).

Company DEO:NYS End Date Value
Earnings/Share 4.77 (GBP) / $6.17 (USD)
Book Value/Share 16.05 (GBP) / $20.74 (USD)
Sales/Share 18.90 (GBP) / $24.42 (USD)
Cash Flow/Share 4.84 (GBP) / $6.25 (USD)
EBITDA/Share 6.53 (GBP) / $8.44 (USD)
Price Based on Comps Adjustment Factor (%)
101.18 (GBP) / $130.74 (USD) -1.3
157.70 (GBP) / $203.75 (USD) 86.6
111.61 (GBP) / $144.20 (USD) 48.1
114.93 (GBP) / $148.50 (USD) 5.3
108.15 (GBP) / $139.74 (USD) 13.6
DEO:NYS Ratios Used Average Values BF.B:NYS STZ.B:NYS
22.77 PE Ratio 21.19 30.49 11.90
6.66 PB Ratio 9.82 16.30 3.35
5.66 PS Ratio 5.91 6.82 4.99
22.11 PCF Ratio 26.30 34.39 18.22
18.18 EV to EBITDA 16.56 21.73 11.38

Multiples

Using a multiples approach we generated a valuation of  102.39 (GBP) / $132.29 (USD) for DEO:NYS

Company DEO:NYS End Date Value
Earnings/Share 4.77 (GBP) / $6.17 (USD)
Book Value/Share 16.05 (GBP) / $20.74 (USD)
Sales/Share 18.90 (GBP) / $24.42 (USD)
Cash Flow/Share 4.84 (GBP) / $6.25 (USD)
EBITDA/Share 6.53 (GBP) / $8.44 (USD)
Price Based on Comps Adjustment Factor
107.42 (GBP) / $138.79 (USD) 0
103.22 (GBP) / $133.37 (USD) 0
93.50 (GBP) / $120.81 (USD) 0
102.54 (GBP) / $132.49 (USD) 0
105.25 (GBP) / $135.99 (USD) 0
Ratios Ratio Average
PE Ratio 22.50
PB Ratio 6.43
PS Ratio 4.95
PCF Ratio 21.20
EV to EBITDA 16.11

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  DEO:NYS for the last 10 years was  6.45

We ran the Adjusted Book Value for  DEO:NYS and generated a book value of  3.93 (GBP) / $5.08 (USD)
By multiplying these we get an adjusted valuation of  25.33 (GBP) / $32.72 (USD)

Analyst Data

In the Stockcalc database there are 5 analysts that provide a valuation for DEO:NYS. The 5 analysts have a concensus valuation for DEO:NYS for 2019 of 116.28 (GBP) / $150.24 (USD).

DEO:NYS Diageo

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
4 3 1 3.7500 Outperform 2018-11-9

Current Price: 142 USD

Analyst Consensus
GBP Millions 2019 2020 2021
Mean EPS 5.11 5.54 6.04
# EPS Analysts 6 6 2
Mean Revenue 12,711.40 13,340.80 14,162.10
# Revenue Analysts 4 4 2
Mean Target Price 116.28
Mean Cash Flow 5.28 5.98 6.46
Mean EBITDA 4,582.10 4,857.10 5,109.90
Mean Net Income 3,081.90 3,275.10 3,469.20
Mean Debt Outstanding 10,528.30 11,260.50 12,601.70
Mean Tax Rate 20.00 20.00
Mean Growth Rate 6.81
Mean Capital Expenditure 587.00 572.50 601.80

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

Notice to User


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