One-glance verdict
Undervalued
$92.92 our estimate vs market $84.75
Wall Street consensus: $107.57 (15.8% higher than our fair-value estimate)
9% below our estimate, below the bear case
Fundamentals snapshot
Diageo plc
DEO · NYQ · Consumer Defensive · Beverages - Wineries & Distilleries
Current price
$84.75
52-week range
$72.45 - $102.74
Market cap
$47.13B
Balance sheet
Stretched
2.94x Stretched
Net debt $20.42B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
3 Risks
3 rewards · 3 risks
- Reward Returns 15.0% on equity, ahead of 50% of its peers.
- Reward Free cash flow was positive in 4/10 years.
- Risk Stock trades 22.4% above its 5-year average P/E.
- Risk Insider ownership is only 0.1% (peer median: 12.6%).
What this company does
Diageo plc
Diageo owns a large collection of famous alcoholic beverage brands, including Johnnie Walker whiskey, Smirnoff vodka, and Guinness beer. The company makes money by selling these drinks to people all around the world, from North America to Asia. This matters because owning many popular brands can create loyal customers and support higher profit margins (the portion of sales a company keeps after covering its costs), as people are often willing to pay more for names they know and trust.
How the company got here
Diageo was formed in 1997 through the merger of two British companies: Guinness, famous for its stout beer, and Grand Metropolitan, a large food and drinks company. This combination created a global leader in alcoholic beverages. Early on, the company sold off food businesses like Pillsbury and Burger King to focus squarely on its premium drinks portfolio. Over the years, it has grown by acquiring iconic brands like Captain Morgan rum and Crown Royal Canadian whisky.
What it actually does
Diageo is in the business of making and selling alcoholic beverages, with over 200 brands sold in about 180 countries. You would recognize many of their names from store shelves and bars, such as Johnnie Walker whisky, Smirnoff vodka, Tanqueray gin, Baileys liqueur, Captain Morgan rum, and Guinness beer. The company offers a wide range of products, from high-end luxury spirits to more affordable, everyday options. They operate more than 130 production sites worldwide, including distilleries and breweries, to create this diverse lineup.
Spirits
This is Diageo's largest and most important business area, making up the majority of its sales. It includes a wide variety of distilled alcoholic drinks that people around the world enjoy. This segment features world-famous Scotch whiskies like Johnnie Walker, vodkas such as Smirnoff and Cîroc, rums like Captain Morgan, gins including Tanqueray and Gordon's, and popular tequilas like Don Julio and Casamigos. Customers for these products range from individuals buying a bottle at a store to bars and restaurants stocking their shelves.
Beer
While smaller than the spirits business, beer is a significant and historic part of Diageo, representing a notable portion of its sales. The star of this segment is Guinness, one of the most recognized beer brands globally, famous for its dark Irish stout. This part of the business primarily serves beer drinkers in pubs, restaurants, and at home. The company also produces other beer brands like Harp Lager and Smithwick's.
Ready-to-Drink
This is a smaller but growing part of Diageo's business that caters to consumer demand for convenience. This segment includes pre-mixed cocktails and other beverages that are sold in cans or bottles, ready for immediate consumption. Examples include Smirnoff Ice and canned gin & tonics. These products are popular with consumers looking for an easy way to enjoy a mixed drink without having to prepare it themselves.
What management is betting on now
Diageo's main focus is on 'premiumization,' which means encouraging customers to choose higher-quality, more expensive drinks. The company sees this as a major way to create value, believing people are willing to pay more for better products like a premium tequila or a single malt Scotch. They are also investing in the growing popularity of tequila and expanding their ready-to-drink options to meet changing consumer tastes. Additionally, the company has a long-term sustainability plan called 'Spirit of Progress,' which includes goals for promoting positive drinking, championing diversity, and reducing their environmental impact.
Price history
How the share price has moved
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Is it cheap or expensive?
Fair value $92.92 vs current price $84.75
Wall Street consensus is the average analyst price target: $107.57 (15.8% higher than our fair-value estimate).
Our most-likely fair value is $92.92 a share — about 9.6% above today's price of $84.75, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Stretched
Net debt $20.4B. Interest coverage 2.9x.
Net debt
$20.42B
Interest coverage
2.94x
Diageo plc's profit covers its interest bill about 2.9 times over. which is weaker than most peers shown here.
Stretched
Worse cushion
Baseline
Better cushion
DEO
BASELINE
Diageo plc
Total debt $22.20B Interest coverage 2.94x This is the baseline the peer rows are being compared against.
Total debt $10.53B Interest coverage 7.92x +169% vs DEO Carries about 2.7x more debt cushion than DEO.
Total debt $72.73B Interest coverage 4.05x +38% vs DEO Carries about 1.4x more debt cushion than DEO.
Total debt $7.91B Interest coverage 6.58x +124% vs DEO Carries about 2.2x more debt cushion than DEO.
What you should know
The case for and against DEO
3 Rewards
3 Risks
Rewards
-
Returns 15.0% on equity, ahead of 50% of its peers.
-
Free cash flow was positive in 4/10 years.
-
Dividend yield is 2.4% with 36-year payout history.
Risks
-
Stock trades 22.4% above its 5-year average P/E.
-
Insider ownership is only 0.1% (peer median: 12.6%).
-
Net debt grew 5.8% over 3 years.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
27.16x
Forward P/E
11.79x
P/B
78.12x
P/S
2.40x
EV/EBITDA
135.59x
PEG ratio
0.53x
Profitability
How much profit each dollar creates
Gross margin
59.8%
Operating margin
27.0%
Net margin
8.8%
ROE
15.0%
ROA
7.5%
Health
Liquidity and balance-sheet strength
Debt / equity
1.71x
Current ratio
1.60x
Quick ratio
0.49x
Total debt
$22.20B
Total cash
$1.78B
Growth
How the business has been compounding
Revenue TTM
$19.64B
Revenue 5Y CAGR
-1.5%
EPS TTM
3.12
EPS 5Y CAGR
-27.8%
Cash flow
How much cash the business throws off
Operating CF TTM
$4.39B
Free CF TTM
$3.19B
FCF margin
16.3%
Dividend
Shareholder payout
Yield
2.4%
Payout ratio
106.5%
Last ex-div date
2026-10-16