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Diageo PLC DGE

Morningstar Rating
GBX 2,539.50 −6.50 (0.26%)
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Company Report

Diageo's Wide Moat Is Unaffected by Cyclical Weakness

Diageo was created in 1997 following the merger of Grand Metropolitan and Guinness. Mergers and acquisitions remain part of the firm's DNA, and subsequent transactions—some transformative, others bolt-on—have established Diageo as a global industry leader. Although the industry is fairly concentrated (we estimate a four-firm concentration ratio of 0.6, above many other fast-moving consumer goods categories, including the global brewing industry at 0.5), we believe there is more consolidation to come. Outside the top five firms, the industry is highly fragmented, and regional players often dominate in niche product categories or local markets. These firms present a new wave of merger opportunities for the industry consolidators, including Diageo, to grow their developing markets footprint.

Price vs Fair Value

DGE is trading at a 166% premium.
Price
GBX 2,539.50
Fair Value
GBX 9,746.00
Uncertainty
Low
1-Star Price
GBX 2,823.00
5-Star Price
GBX 5,444.00
Economic Moat
Rrgnt
Capital Allocation
Knwqzstf

Bulls Say, Bears Say

Bulls

Across the U.S., Diageo's distributors have more than 2,800 dedicated salespeople focused solely on the company's products. This sizable support base has contributed to above-average operating margins in this highly profitable region.

Bears

The spirits industry is more cyclical than beer, particularly in the premium segment and above, and Diageo's price positioning at the high end can hurt revenue when the global economy slows.

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News

Trading Information

Previous Close Price
GBX 2,546.00
Day Range
GBX 2,520.002,731.50
52-Week Range
GBX 2,452.003,509.00
Bid/Ask
GBX 2,502.50 / GBX 2,620.00
Market Cap
GBX 5.64 Tril
Volume/Avg
3.3 Mil / 3.8 Mil

Key Statistics

Price/Earnings (Normalized)
17.44
Price/Sales
3.47
Dividend Yield (Trailing)
3.20%
Dividend Yield (Forward)
3.20%
Total Yield
5.28%

Company Profile

The product of a merger between Grand Metropolitan and Guinness in 1997, Diageo is one of the world's leading producers of branded premium spirits, approximately level with Kweichow Moutai in revenue terms. It also produces and markets beer and wine. Brands include Johnnie Walker blended scotch, Smirnoff vodka, Crown Royal Canadian whiskey, Captain Morgan rum, Casamigos tequila, Tanqueray gin, Baileys Irish Cream, and Guinness stout. Diageo also owns 34% of premium champagne and cognac maker Moet Hennessy, a subsidiary of French luxury goods maker LVMH Moet Hennessy-Louis Vuitton, and a near-56% stake in India's United Spirits.
Sector
Consumer Defensive
Industry
Beverages - Wineries & Distilleries
Stock Style Box
Large Core
Total Number of Employees
30,269

Competitors

Valuation

Metric
DGE
BF.B
RI
Price/Earnings (Normalized)
17.4420.6415.67
Price/Book Value
7.385.942.03
Price/Sales
3.475.052.86
Price/Cash Flow
14.6823.1614.35
Price/Earnings
DGE
BF.B
RI

Financial Strength

Metric
DGE
BF.B
RI
Quick Ratio
0.650.780.66
Current Ratio
1.582.591.91
Interest Coverage
5.6011.118.50
Quick Ratio
DGE
BF.B
RI

Profitability

Metric
DGE
BF.B
RI
Return on Assets (Normalized)
9.16%10.39%5.39%
Return on Equity (Normalized)
42.99%24.93%12.64%
Return on Invested Capital (Normalized)
14.78%14.31%7.92%
Return on Assets
DGE
BF.B
RI
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