Despite more than a 30% rise since the March lows of this year, at the current price of $136 per share, we believe PepsiCo stock (NASDAQ: PEP) is still a good opportunity for investors. PEP stock has increased from $104 to $135 off the recent bottom, less than the S&P which increased by 50% from its recent lows. Even though the stock is around 23% above the level at which it was at the end of 2017, it is still lower than its pre-Covid (February 2020) high of $147. We believe that PEPâs stock could rise over 10% from its current level, driven by expectations of rising demand and easing of supply constraints following the gradual lifting of lockdowns and benefits from recent acquisitions. Our dashboard What Factors Drove 23% Change In PepsiCo Stock Between 2017 And Now? has the underlying numbers behind our thinking.
Some of the sharp stock price rise between 2017 and 2019 is justified by the 5.7% growth seen in PepsiCoâs revenues during this period, the effect of which was further amplified by a 42% rise in profitability. Net income margins increased from 7.7% in 2017 to 10.9% in 2019. Margins shot up in 2018 due to tax benefits received, but margin in 2019 was still above the 2017 level due to benefits from the companyâs productivity program. On a per share basis, earnings increased from $3.40 in 2017 to $5.23 in 2019.
PepsiCoâs P/E multiple dropped from 32x at the end of 2017 to 26x by the end of 2019 mainly due to growth in EPS being higher than growth in the stock price. However, the P/E multiple dropped further in the initial few months of 2020 only to recover over the recent weeks, and now stands at 26x (same as Dec 2019 level). We