PepsiCo (PEP) continues to outperform its major packaged food competitors thanks to years of efforts in terms of improved positioning and great execution. The $60+ billion giant is outperforming its peers by quite a few percentage points. That is comforting for investors, who in turn have been willing to value shares at a steep 22 times multiple, amidst moderate leverage and a solid dividend payout.
While growth and predictability translate into premium valuation multiples in this environment, I think that the valuation is full to say the least, certainly if rates continue their march higher. As I require a margin of safety, I am only buying if shares trade at market-equivalent valuation multiples. That translates into a target price below the $100 mark.
