Buffett Brain · Research note
Score updated 21 Oct 2026 · analysis from 2 Jun 2026
PEP· Consumer Staples
PepsiCo
PepsiCo is a durable snack and beverage empire whose 54% gross margin is wonderful, but at 22.9 times earnings the price is not.
Buffett fit
Partial fit
Owner
50
Durability
68
Management
37
Price
40
Score updated 21 Oct 2026 · analysis from 2 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Consumer Staples stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned all of PepsiCo, I would be pleased with the everyday economics.
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Few products outlast a bag of chips and a bottle of Gatorade, and the durability score of 68 reflects that staying power.
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Here is where I grow uneasy, and the management score of 37 says so plainly.
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There is little at this price, and I will not pretend otherwise.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1 of 54.1% shows real , the ability to charge more than a store brand and keep the difference.
- 2 of 14.8% turns those sales into solid profit on a vast revenue base.
- 3 equals 93% of net income (fcf-to-ni 0.93), so reported profits are backed by real, spendable cash.
- 4Return on capital of 13.2% today, and 14.1% averaged over five years, signals a durable economic engine that has not faded.
Concerns
7- 1Valuation is the central problem: 22.9 times earnings and a 3.84% owner-earnings yield leave no for a business growing earnings at 2.3%.
- 2EPS has grown only 2.3% a year, far slower than the 4.3% revenue growth, so profit per share is barely advancing.
- 3Debt is heavy at 2.47 times equity and 2.8 times EBITDA, a lot of to carry on a consumer staple.
- 4The current ratio of 0.90 is below one, meaning short-term obligations slightly exceed short-term assets.
Price history
$134-16.2%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
PepsiCo sells salty snacks under Frito-Lay and drinks under Pepsi, Gatorade, and Quaker to billions of people who buy them again and again, day after day. That repeat habit shows up in a of 54.1% and an of 14.8%, which are the marks of a company that can charge a few cents more than the store brand and keep the difference. Revenue has compounded at only 4.3% a year, so this is a toll bridge that collects steady tolls, not a fast-growing one.
How this analysis has moved
The call has held across 5 reviews.
Sep 27, 2026 → Oct 21, 2026
What other investors would say
The same company, judged by three other documented playbooks.
Keep researching
Similar companies in Consumer Staples
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