If the fact that PepsiCo (PEP) shares hit all-time highs just four weeks ago is any clue, it’s clear the market is thinking bullishly about the stock.
When you look at the company’s bottom line growth (or lack thereof) for the last few years, however, one has to wonder what these buyers are getting excited about. Annual per-share profits rolled in at an $4.40 in 2011, fell to $4.10 in 2012, and are only expected to reach $4.40 again this year. The sales picture and outlook roughly mirrors the earnings trend. They’re not necessarily poor results, but they don’t exactly justify the stock’s 20% gain for the year.
Those investors familiar with PepsiCo will know the company is looking for big things from China this year and next. But, China’s not exactly the star any company wants to hitch its wagon to right now. There’s also something a little unnerving about a stock that trades at 17.2 times its forward-looking earnings, but is only apt to grow its income by 7.3% this year (and only by 8.6% next year).