Keurig Dr Pepper Inc. KDP
Verdict: Sell. Fair value $22.68 against a price of $27.32 on 6 Jan 2026, 17% below the price.
In plain words
The case for: Narrow competitive moat provides durability. Industry tailwinds with growing market.
The case against: Intense competitive pressure could compress margins. The OCF / Net Income ratio demonstrates significant volatility, dropping from a very strong 1.98 in.... Net Income exhibits a see-saw pattern: $2.15B (2021), $1.44B (2022), $2.18B (2023), and $1.44B....
Main risks
- Deteriorating Profitability: Net income has fallen from $2.15B in 2021 to $1.44B in 2024 despite a 21% increase in revenue over the same period, indicating severe margin compression.
- Poor Capital Allocation: Return on Equity (5.9%) and ROIC (3.2%) are extremely low. The calculated 3-year ROIIC is negative (-7.8%), a severe red flag suggesting recent capital investments have been value-destructive.
- High Leverage: The estimated Net Debt to EBITDA ratio is over 8x. This level of debt is very high and poses a significant financial risk, especially given the context of declining profitability.
- The OCF / Net Income ratio demonstrates significant volatility, dropping from a very strong 1.98 in...
- Net Income exhibits a see-saw pattern: $2.15B (2021), $1.44B (2022), $2.18B (2023), and $1.44B...
- Intense competitive environment