Company Profile
Pepsi Company (Pepsico) produces and sells various types of products such as sweet, salty, grain-based snacks, convenient, non-carbonated, and carbonated beverages (Pepsico.com). The firm has a collection (portfolio) of brands like Lay’s, Quaker, Tropicana, Gatorade, Doritos, and Pepsi (Pepsico.com). Most bottling infrastructures in North America are owned by the company although it directly distributes to stores while in the international markets, Pepsi uses independent bottlers (Morningstar.com).
PEP Security Price
On March 10, 2011, the stock of the Pepsi Company was at a low of $64.12, and a volume of 8.7 million worth of stocks was traded closing the day for $64.43 (Ycharts.com). The market was bearish on 14 March as the price ranged from a low of $64.33 and dropped to $62.05 with a trading volume of 8.4 million, the lowest price that was recorded was on March 16 (Ycharts.com). The price increased steadily since that day with the stock taking a bullish trend meaning most investors in the market started to buy more PEP stock for $62.91. The investors expected that the stock would do well in the future and that was the reason for the increased trading in the company’s stock. The stock recorded the highest price of $71.78 with a trading volume of 5.2 million on May 19, 2011; the investors started to dispose of their share at this price as a result of price decrease by $1.33 to $70.45; this means that the market was bearish (Morningstar.com).
On June 1, the stock opened for $70.58 and dropped to $68.78 on June 3, 2011; the lowest price to be made by the stock was $68.49 on June 8, 2011(Ycharts.com).
The stock trend may have been attributed to a high price/ earnings ratio of 18.4 compared to the industry average of 10.4, many investors were ready to pay a higher price for the stock than the other firms in the industry due to the high revenue growth rate of 13.6% compared to the industry growth of 9.9% (Yahoo.com). The company attracted a market value of $5 per share if it was going to operate as a going concern; this implies that the firm market value was very high compared to the industry average of $2.3 (Pepsico.com).
Financial Ratios
The shareholder’s equity was not exposed to leverage risk as the debt/equity ratio of the company was at 100% compared to 130% of the industry which means that the Pepsi Company’s competitors were highly geared. Therefore, the investors were more willing to buy and sell Pepsi stock to make capital gains. On the other hand, the recent cash dividend was declared at $0.5150 and it is expected to grow at 3% in the future, this implies that long-term investors bought the stock to earn higher dividends in the future (Bestgrowthstock.com).
The PEP beta is 0.6 which can be interpreted to mean that the security is less risky than the market (Standard & Poor Index). It implies that if the returns of the Standard & Poor index moves by 1% relative to the average then the return of the PEP security will vary by 0.6% relative to the average (Yahoo.com). The PEP security is influenced by the beta coefficient since all other variables already exist in the market (Yahoo.com). The low-risk investment on the PEP security explains the bullish trend in the last 3 months as more investors bought more than they sold to earn dividend income (NASDAQ.com).
Conclusion
In conclusion, Pepsi Company Security (PEP) is less risky than the market; this means that the investors can buy the security at its lowest price and hold to earn dividend income.
For the risk-takers this is not the best security to buy based on the last 3 months’ analysis since the risk is very low, it is best preferred by the risk-averse investors.
Works Cited
Bestgrowthstock.com. “Stock market trading activities”, 2011. Web.
Pepsico.com. . “Pepsico Inc,” 2011.
Morningstar.com. “Pepsico Inc.” 2011. Web.
NASDAQ.com. “Info Quotes”, 2011.
Yahoo.com. “Investing”, 2011. Web.
Ycharts.com. “Analysis”, 2011. Web.