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The coronavirus outbreak has forced pubs and bars to close in the UK, which will likely have an affect on alcoholic beverage sales. As a result, the Diageo share price has been impacted, but some investors may see this as a good time to buy Diageo stock. Diageo plc (LON: DGE) is a multinational alcoholic beverages company based in the UK. It is the world’s second largest distiller, and owns brands including Smirnoff, Johnnie Walker, Guinness and Gordon’s.
Since the stock market crash in March caused by coronavirus, Diageo's share price has had significant negative movement.
Its last market close was 2730p, which is 11.92% down on its pre-crash value of 3099.5p and 33.13% up on the lowest point reached during the March crash when the shares fell as low as 2050.6p.
If you had bought £1,000 worth of Diageo shares at the start of February 2020, those shares would have been worth £715.49 at the bottom of the March crash, and if you held on to them, then as of the last market close they'd be worth £881.24.
|52-week range||2050.6p - 3633.5p|
|50-day moving average||2614.31p|
|200-day moving average||2767.615p|
|Wall St. target price||2916.05p|
|Dividend yield||0.7p (2.44%)|
|Earnings per share (TTM)||127.8p|
The technical analysis gauge below displays real-time ratings for the timeframes you select. This is not a recommendation, however. It represents a technical analysis based on the most popular technical indicators: Moving Averages, Oscillators and Pivots. Finder might not concur and takes no responsibility.
|1 week (2020-08-03)||N/A|
|1 month (2020-07-14)||-0.97%|
|3 months (2020-05-14)||1.95%|
|6 months (2020-02-10)||N/A|
|1 year (2019-08-10)||N/A|
|2 years (2018-08-10)||N/A|
|3 years (2017-08-10)||N/A|
|5 years (2015-08-10)||N/A|
Valuing Diageo stock is incredibly difficult, and any metric has to be viewed as part of a bigger picture of Diageo's overall performance. However, analysts commonly use some key metrics to help gauge the value of a stock.
Diageo's current share price divided by its per-share earnings (EPS) over a 12-month period gives a "trailing price/earnings ratio" of roughly 22x. In other words, Diageo shares trade at around 22x recent earnings.
That's relatively high compared to, say, the trailing 12-month P/E ratio for the FTSE 250 at the end of September 2019 (19.71). The high P/E ratio could mean that investors are optimistic about the outlook for the shares or simply that they're over-valued.
However, Diageo's P/E ratio is best considered in relation to those of others within the beverages—wineries & distilleries industry or those of similar companies.
Diageo's "price/earnings-to-growth ratio" can be calculated by dividing its P/E ratio by its growth – to give 7.5145. A low ratio can be interpreted as meaning the shares offer better value, while a higher ratio can be interpreted as meaning the shares offer worse value.
The PEG ratio provides a broader view than just the P/E ratio, as it gives more insight into Diageo's future profitability. By accounting for growth, it could also help you if you're comparing the share prices of multiple high-growth companies.
However, it's sensible to consider Diageo's PEG ratio in relation to those of similar companies.
Diageo's EBITDA (earnings before interest, taxes, depreciation and amortisation) is £4.5 billion.
The EBITDA is a measure of a Diageo's overall financial performance and is widely used to measure a its profitability.
To put Diageo's EBITDA into context you can compare it against that of similar companies.
|Revenue TTM||£13.2 billion|
|Operating margin TTM||31.73%|
|Gross profit TTM||£8 billion|
|Return on assets TTM||8.18%|
|Return on equity TTM||31.47%|
|Market capitalisation||£65.5 billion|
TTM: trailing 12 months
Environmental, social and governance (known as ESG) criteria are a set of three factors used to measure the sustainability and social impact of companies like Diageo.
When it comes to ESG scores, lower is better, and lower scores are generally associated with lower risk for would-be investors.
Total ESG risk: 16.31
Socially conscious investors use ESG scores to screen how an investment aligns with their worldview, and Diageo's overall score of 16.31 (as at 07/01/2020) is excellent – landing it in it in the 10th percentile of companies rated in the same sector.
ESG scores are increasingly used to estimate the level of risk a company like Diageo is exposed to within the areas of "environmental" (carbon footprint, resource use etc.), "social" (health and safety, human rights etc.), and "governance" (anti-corruption, tax transparency etc.).
To gain some more context, you can compare Diageo's total ESG risk score against those of similar companies.
Environmental score: 0.95/100
Social score: 2.78/100
Governance score: 2.58/100
Controversy score: 3/5
ESG scores also evaluate any incidences of controversy that a company has been involved in. Diageo scored a 3 out of 5 for controversy – a middle-of-the-table result reflecting that Diageo hasn't always managed to keep its nose clean.
Wondering how that compares? Below are the controversy scores of similar companies.
|Total ESG score||16.31|
|Total ESG percentile||9.56|
|Level of controversy||3|
Dividend payout ratio: 53.45% of net profits
Recently Diageo has paid out, on average, around 53.45% of net profits as dividends. That has enabled analysts to estimate a "forward annual dividend yield" of 2.44% of the current stock value. This means that over a year, based on recent payouts (which are sadly no guarantee of future payouts), Diageo shareholders could enjoy a 2.44% return on their shares, in the form of dividend payments. In Diageo's case, that would currently equate to about 0.7p per share.
Diageo's payout ratio would broadly be considered high, and as such this stock could appeal to those looking to generate an income. Bear in mind however that companies should normally also look to re-invest a decent amount of net profits to ensure future growth.
The latest dividend was paid out to all shareholders who bought their shares by 27 February 2020 (the "ex-dividend date").
Diageo's dividend payout ratio is perhaps best considered in relation to those of similar companies.
Diageo's shares were split on a 1136:1000 basis on 2 February 1998. So if you had owned 1000 shares the day before before the split, the next day you'd have owned 1136 shares. This wouldn't directly have changed the overall worth of your Diageo shares – just the quantity. However, indirectly, the new 12% lower share price could have impacted the market appetite for Diageo shares which in turn could have impacted Diageo's share price.
Over the last 12 months, Diageo's shares have ranged in value from as little as 2050.6p up to 3633.5p. A popular way to gauge a stock's volatility is its "beta".
Beta is a measure of a share's volatility in relation to the market. The market (LSE average) beta is 1, while Diageo's is 0.3145. This would suggest that Diageo's shares are less volatile than average (for this exchange).
To put Diageo's beta into context you can compare it against those of similar companies.
Diageo plc, together with its subsidiaries, produces, markets, and sells alcoholic beverages worldwide. The company offers scotch, whisky, gin, vodka, rum, ready to drink products, Irish cream liqueur, raki, liqueur, wine, tequila, Canadian whisky, American whiskey, adult beverages, cachaça, and brandy, as well as beer, including cider and non-alcoholic products. It provides its products primarily under the Johnnie Walker, Smirnoff, Baileys, Captain Morgan, Tanqueray, and Guinness brands. The company also offers its products under the Crown Royal, Yenì Raki, Shui Jing Fang, Johnnie Walker Blue Label, Bulleit Bourbon, Don Julio, Buchanan's, J?B, Grand Old Parr, Tanqueray No. TEN, Ron Zacapa Centenario XO, Casamigos, Bundaberg, McDowell's No. 1, Ypióca, Lagavulin, The Singleton of Glen Ord, Johnnie Walker Gold Label Reserve, Windsor, Black&White, Cîroc, Ketel One vodka, and Talisker brands. It has operations in North America, Europe, Turkey, Africa, Latin America, the Caribbean, the Asia Pacific, and internationally. The company was founded in 1886 and is headquartered in London, the United Kingdom.
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