Should you buy Diageo stock? (November 2023)

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Diageo stock analysis. Ticker: DEO.

At the current share price, Diageo has a market valuation of 63 billion pounds. It’s got 1.4 billion of cash on the balance sheet and almost 16 billion of debt for an enterprise value of 77 billion. Over the last 12 months the company has produced 17 billion of revenue and 3.7 billion of net income which means the stock is valued at 5 times revenue and 17 times earnings, well below the historical average.

17 times earnings is cheap considering that Diageo is one of the largest drinks companies in the world. In fact, the company owns the number one brands across whisky, scotch, vodka, rum, tequila and gin. Drinks like whiskey and Tequila can take 10 or 20 years to produce. That gives Diageo an edge since it takes new entrants a long time to get started.

In a recent event, Diageo management gave an optimistic forecast for the years ahead. According to management, the alcoholic drinks market should grow by 4% a year and spirits should be the fastest growing category ahead of beer and wine. As a result, Diageo thinks it can drive annual revenue growth in the region of 5-7% a year.

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