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PepsiCo Inc (PEP) Extended Graph Analysis

March 5th, 2020 Posted by Extended Analysis No Comment yet

Company Profile

PEP logo

PepsiCo is leading in the food and beverage multinational company, well known for its product diversification selling products in around 200 countries and territories. Their products caters to the tastes of their customers young and adults. They faced the challenge of providing their consumers nutritious food and beverages. Its main competitors is The Coca-Cola Company.

PepsiCo was founded by Caleb Bradham, headquartered in Purchase, Harrison, New York, United States. It is a public company registered under NASDAQ with ticker symbol PEP.

 

PepsiCo (PEP) Extended Graph Analysis

 

1. PEP CASH FLOW

PEP CASH FLOW

2015 2016 2017 2018 2019 TTM
Net cash flow provided by operating activites 10,580,000,000 10,404,000,000 9,994,000,000 9,415,000,000 9,649,000,000 9,649,000,000
Net cash used for investing activities -3,569,000,000 -7,148,000,000 -4,403,000,000 4,564,000,000 -6,437,000,000 -6,437,000,000
Net cash provided by (used for) financing activities -3,828,000,000 -2,942,000,000 -4,186,000,000 -13,769,000,000 -8,489,000,000 -8,489,000,000
Capital expenditure -2,758,000,000 -3,040,000,000 -2,969,000,000 -3,282,000,000 -4,232,000,000 -4,232,000,000
Free cash flow 7,822,000,000 7,364,000,000 7,025,000,000 6,133,000,000 5,417,000,000 5,417,000,000
Working Capital 5,453,000,000 5,954,000,000 10,525,000,000 -245,000,000 -2,816,000,000 -2,816,000,000

Facts:

  • Cash from operating activities was $9.649 billion in the trailing twelve months.
  • Cash used for investing activities was -$6.437 billion in the trailing twelve months.
  • Net cash from financing activities was -$8.489 billion in the trailing twelve months.
  • Capital expenditure was -$4.232 billion in the trailing twelve months.
  • Free cash flow was $5.417 billion in the trailing twelve months.
  • Working capital was -$2.816 billion in the trailing twelve months.

Explanation:

  • Cash from operating increased 2.49% from 2018 to trailing twelve months.
  • Investing activities were purchase of property, plant and equipment and acquisitions.
  • Financing activities were debt repayment, common stock repurchased and dividend payments.
  • Capital expenditure was investment in property, plant and equipment.
  • Free cash flow decreased 12 percent from 2018.
  • Working capital was negative from 2018, current liabilities were higher than the current assets.

Interpretation

The company was able to provide cash from its operating activities in the last five years. PEP had a number of business acquisitions in recent years as one of their strategic moves.

 

2. PEP BALANCE SHEET

PEP BALANCE SHEET

2015 2016 2017 2018 2019
Total cash 12,009,000,000 16,125,000,000 19,510,000,000 8,993,000,000 5,738,000,000
Current Assets 23,031,000,000 27,089,000,000 31,027,000,000 21,893,000,000 17,645,000,000
Net property, plant and equipment 16,317,000,000 16,591,000,000 17,240,000,000 17,589,000,000 20,853,000,000
Total non-current assets 46,636,000,000 47,040,000,000 48,777,000,000 55,755,000,000 60,902,000,000
Total assets 69,667,000,000 74,129,000,000 79,804,000,000 77,648,000,000 78,547,000,000
Current liabilities 17,578,000,000 21,135,000,000 20,502,000,000 22,138,000,000 20,461,000,000
Non-current liabilities 40,166,000,000 41,899,000,000 48,413,000,000 40,992,000,000 43,300,000,000
Total liabilities 57,744,000,000 63,034,000,000 68,915,000,000 63,130,000,000 63,761,000,000
Retained earnings 50,472,000,000 52,518,000,000 52,839,000,000 59,947,000,000 61,946,000,000
Stockholders equity 11,923,000,000 11,095,000,000 10,889,000,000 14,518,000,000 14,786,000,000

Facts:

  • Total cash was $5.738 billion in 2019.
  • Current assets were $17.645 billion in 2019.
  • Net property, plant and equipment was $20.853 in 2019.
  • Total non-current assets were $60.902 billion in 2019.
  • Total assets were $78.547 billion in 2019.
  • Current liabilities were $20.641 billion in 2019.
  • Non-current liabilities were $43.300 in 2019.
  • Total liabilities were $63.761 in 2019.
  • Retained earnings were $61.946 in 2019.
  • Stockholders equity was $14.786 in 2019

Explanation:

  • Total cash represents 7.31% of total assets.
  • Current assets represent 22.46% of total assets.
  • Net property, plant and equipment represents 26.55% of total assets.
  • Total non-current assets represent 77.54% of total assets.
  • Total assets grew 13% in five years.
  • Current liabilities represent 32% of total liabilities.
  • Non-current liabilities represent 68% of total liabilities.
  • Total liabilities represents 81% to total liabilities and equity.
  • Stockholder equity represents 19% of total liabilities and equity.

Interpretation

The company is highly leveraged, using four-fifth of creditors money in its business operation, nearly 20% of investors money is utilized in the operation. In other words, the creditors have more stake than the investors. 

 

3. PEP INCOME AND MARKET

PEP INCOME AND MARKET

2015 2016 2017 2018 2019 2020
Revenue 63,056,000,000 62,799,000,000 63,525,000,000 64,661,000,000 67,161,000,000 67,161,000,000
EBIT 9,712,000,000 9,785,000,000 10,509,000,000 10,110,000,000 10,291,000,000 10,291,000,000
Net Income 5,452,000,000 6,329,000,000 4,857,000,000 12,515,000,000 7,314,000,000 7,314,000,000
EBITDA 10,828,000,000 12,263,000,000 13,122,000,000 13,113,000,000 12,879,000,000 12,879,000,000
Market Capitalization 144,684,000,000 150,059,000,000 170,543,000,000 155,666,000,000 190,108,000,000 197,550,000,000
Intrinsic Value 209,836,396,353 745,025,154,189 839,073,420,473 2,631,653,205,144 4,029,094,790,996 4,718,747,139,220

Facts:

  • Revenue was $67.161 billion in trailing twelve months.
  • EBIT was $10.291 billion in the trailing twelve months.
  • Net income was $7.314 billion in the trailing twelve months.
  • EBITDA was $12.879 billion in the trailing twelve months.
  • The market capitalization was $197.550 billion.
  • Intrinsic value was $4.719 trillion in the trailing twelve months.

Explanation:

  • Revenue grew 7% in five years and from 2018 it grows 3.87%.
  • EBIT grew 6% in five years and shows an increase of 1.79% from 2018.
  • Net income grew 34% in five years. It has a negative growth of 41.56% from 2018.
  • EBITDA grew 19% in five years. It has a negative growth from 2018 at 1.78%.
  • Market capitalization was erratic in movement in the last five years and it increased 4% from 2019 to the last quarter.
  • The calculated intrinsic value shows a very high value at $4.719 trillion.

Interpretation

The company is investing heavily in advertising and marketing, the reason its sales, general and administrative expense was high at 72% of gross profit which impacted the net income.

 

4. PEP FINANCIAL RATIOS

PEP FINANCIAL RATIOS

2015 2016 2017 2018 2019 2020
Asset turnover (average) 0.90 0.87 0.83 0.82 0.86 0.86
Return on assets % 7.77 8.79 6.31 15.89 9.37 9.37
Return on equity % 37.20 55.14 44.32 98.66 49.92 49.92
Debt/Equity 2.46 2.72 3.12 1.95 1.97 1.97
Return on invested capital % 13.38 15.55 11.00 27.64 17.11 17.11
Interest coverage 8.67 7.37 9.34 7.03 9.20 9.20

Facts:

  • Asset turnover was 0.86 in the trailing twelve months.
  • Return on asset was 9.37% in the trailing twelve months.
  • Return on equity was 49.92% in the trailing twelve months.
  • Return on invested capital was 17.11% in the trailing twelve months.
  • Interest coverage was 9.20 in the trailing twelve months.

Explanation:

  • Asset turnover means that the company is generating $0.86 of sales for every $1 investment in assets.
  • Return on assets means for every $1 invested in assets the company generates 9.37 cents of net income.
  • Return on equity indicates that for every $1 of shareholders equity, PEP generated 49 or 50 cents in profit.
  • Return on invested capital indicates that the invested capital yielded 17.11 percent of return.
  • Interest coverage indicates that the company earns 9 times earnings than its current interest payment.

Interpretation

The company’s financial ratios show acceptable ratios. The company is liquid

 

5. PEP KEY EXECUTIVE COMPENSATION

PEP KEY EXECUTIVE COMPENSATION

Name/Title 2014 2015 2016 2017 2018
Key Executive Compensation 37,399,250 48,405,262 56,275,124 63,116,455 65,489,721
Indra K. Nooy/ Chairman of the Board and Chief Executive Officer 22,485,574 26,444,990 29,783,416 31,082,648 24,491,117
Ramon L Laquarta/Chairman of the Board and CEO 5,655,039 6,113,574 10,157,245 10,827,396
Albert P. Carey/CEO North America 7,712,149 7,744,388 10,071,299 10,160,310 7,868,118
Laxman Narasimhan/Global Chief Commercial Officer and CEO Latin America 7,009,990
Silviu Popovici/CEO Europe Sub Saharan Africa 6,151,034
Hugh F. Johnston/Vice Chairman, Executive Vice President and Chief Financial Officer 7,201,527 8,560,845 10,306,835 11,716,252 9,142,066

Facts:

  • The key executive compensation was $65,489,721 in 2018.
  • The CEO compensation was $24,491,117 in 2018.
  • Chairman of the Board and CEO compensation was $10,827,396 in 2018.
  • CEO North America compensation was $7,868,118 in 2018.
  • Chief Commercial Officer and CEO Latin America compensation was $7,009,990 in 2018.
  • CEO Europe Sub Saharan Africa compensation was 6,151,034 in 2018.
  • Vice Chairman, Executive Vice President and Chief Financial Officer compensation was $9,142,066 in 2018.

Explanation:

  • The total key executive compensation represents 0.90% of net income.
  • CEO compensation represents 37.40% of the total key executive compensation.
  • Chairman of the Board and CEO compensation represents 16.53% of the total key executive compensation.
  • CEO North America compensation represents 12% of the total key executive compensation.
  • Chief Commercial Officer and CEO Latin America compensation represents 11% of the total key executive compensation.
  • CEO Europe Sub Saharan Africa compensation represents 9.39% of the total key executive compensation.
  • Vice Chairman, Executive Vice President and Chief Financial Officer compensation represents 14% of the total key executive compensation.

Interpretation

The company’s key executive compensation represents 0.90% of the net income.

 

6. PEP LOBBYING AND CONTRIBUTIONS

PEP LOBBYING AND CONTRIBUTIONS

Period USD Period USD
1998 960,000 2009 9,373,000
1999 1,300,000 2010 6,874,800
2000 1,320,000 2011 3,260,000
2001 1,035,000 2012 3,330,000
2002 960,000 2013 3,720,000
2003 860,000 2014 3,510,000
2004 720,000 2015 4,470,000
2005 740,000 2016 3,140,000
2006 880,318 2017 2,880,000
2007 1,000,636 2018 3,470,000
2008 1,096,000 2019 3,490,000

Explanation:

PepsiCo has been spending annual lobbying and contributions since 1998. The amount varies annually. NOTE: Figures on this page are calculations by the Center for Responsive Politics based on data from the Senate Office of Public Records. Data for the most recent year was downloaded on January 23, 2020 and includes spending from January 1 – December 31. Prior years include spending from January through December.

Source: OpenSecret.org Center for Responsive Politics

 

6. PEP FINANCIAL STRENGTH

PEP FINANCIAL STRENGTH

DATA

Working capital -$2,816,000,000
Total assets $78,547,000,000
Sales $67,161,000,000
EBIT $10,291,000,000
Market value of equity $197,550,000,000
Book value of total liabilities $63,761,000,000
Retained earnings $61,946,000,000

 

CALCULATION

Ratio Score Result
A – Working Capital / Total Assets -0.0359 1.20 -0.04
B – Retained Earnings / Total Assets 0.79 1.40 1.10
C – EBIT / Total Assets 0.13 3.30 0.43
D – Market Value of Equity / Book Value of Total Liabilities 3.10 0.60 1.86
E – Sales / Total Assets 0.86 1.0 0.86
Z-Score 4.21

 

Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

 

Explanation

Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

The overall Z-Score of PEP was 4.21, the grading scale for 3.00 and over according to Altman indicates that the company will not declare bankruptcy. This measurement is not calculated for the purpose of estimating the company will declare bankruptcy but it helps in comparing other companies that have become insolvent.

Conclusion

PepsiCo was liquid and has great potential for accelerating its revenue in the long run due to its diversification strategy. The company manufactures and sells a variety of food and beverages that caters to young people and adults. Although the company is highly leveraged, PEP is stable and has a strong financial strength.

CITATION

https://www.opensecrets.org/federal-lobbying/firms/summary?cycle=1998&id=D000000200

https://www.pepsico.com/about/about-the-company

https://www.morningstar.com/stocks/xnas/pep/quote

Researched and written by Criselda

Jinpan International Limited-jst

Jinpan International Limited (JST) Financially Healthy

December 12th, 2012 Posted by Company Research Report No Comment yet

Jinpan International Limited (JST), through its subsidiaries, designs, manufactures and sells electrical power control and distribution equipment in China, the United States, and Europe. Source Bloomberg

Balance Sheet

Liquidity

jstliq

  • The current ratio of JST was 2.62, 2.18, 3.07, 2.38 and 2.20 with an average of 2.49. This shows that the company’s current resources were greater than its current liabilities by an average of 249 percent for the last five years period.
  • Its quick ratio, which is current asset less inventory was 1.92, 1.60, 2.48, 1.97 and 1.81, an average of 1.96; also shows that it has an average of 196 percent for the same period.
  • And JST’s net working capital ratio was .50, .40, .50, .44 and .41 or average of .45 in five years. We get this by dividing the networking capital by the total asset of the company.
  • Finally, its working capital (in dollars) which is a current asset less current liabilities was 60, 65, 91, 101 and 114, its average was 86.2. There was a trending up of its business from 2007 to 2011 as clearly shown in the above table. There was an expansion of business seen as its working capital was increasing per year.

Looking up at the above data, the company is doing well in its business with sufficient current resources. The company is considered financially healthy according to Rio.

Efficiency or Asset Management

jsteffic

  • Inventory turnover ratio was 4.62, 4.97, 6.12, 4.90 and 6.08. The company has an average inventory turnover of 5.34 for the last five years. This is the number of times the inventory moved and replaced.
  • The receivable turnover ratio of the company was 2.79, 2.69, 2.48, 1.93 and 2.03, with an average of 2.39 in five years. Receivables turnover looks at how fast we collect on our sales or how many times each year we clean up or totally collect our accounts receivable.
  • Its payable turnover ratio was 20, 14.45, 15.90, 11.31 and 9.78. an average of 14.29. It reveals how often payables turn over during the year.  It shows that the company pays its supplier 14 average each period.
  • Fixed asset turnover ratio was 10, 6.63, 5.48, 4.32 and 5.63. It has an average of 6.41 for the last five years.  It shows that the ratio is trending down so there’s a need to look closer into it.

Leverage

Below is where you can see the debt ratio, debt to equity and solvency ratio of Jinpan International Limited from 2007 to 2011.

jstlev

  • Debt ratio of the company was .32, .34, .25, .33 and .35, with an average of .32. It shows that its leverage is below 50 percent.
  • Debt to equity was .47, .51, .34, .49 and .54. an average of .47. It also shows that total obligation was 47 percent of equity.
  • While solvency ratio was .44, .40, .72, .24 and .29. an average of .42, which shows that there’s a decrease in 2010 and 2011 because of the company’s increase in short-term debt during this period.

In order to determine who has the majority control of the company’s total assets, we also use the following ratios:

  • Current liabilities to total asset was .30, .34, .24, .32 and .34. an average of .31. It tells us that the creditors, particular suppliers have 31 percent claims on the total asset of the company.
  • Long-term liability to total asset was .01, 0, .02, .01 and .01. an average of .01. It shows that only 1 percent will go to banks or bondholders.
  • Stockholders’ equity to total asset was .69, .66, .75, .67 and .65 average of .68 which shows that the stockholders or owners have 68 percent claims on the company’s total asset, so they are the major claimant of the company.

The above data shows that Jinpan International Limited ran its business with minimal debt; the sources of funds were internal. They have sufficient current resources to fund its business, the company is well managed and continue expanding.

Property, Plant, and Equipment

jstppe

  • Investment in property, plant, and equipment of JST was 19, 34, 41, 51 and 61. Average of 41. It shows that the company expanded its investment every year with a percentage growth of 79, 20, 24, and 20 percent respectively.
  • Accumulated depreciation was 7, 10, 13, 17 and 22, an average of 14. This is equivalent to 37, 29, 32, 33 and 36 percent of the gross PPE.
  • Net property, plant, and equipment were 12, 24, 29, 34 and 40. with an average of 28 which is equivalent also to 63, 71, 71, 67 and 66 percent of the total cost.

With the above-given data, the remaining life of the company’s PPE would then be 3 years more before it would be fully depreciated.

Income Statement

Profitability

jstincome

  • Net margin was .13, .13, .18, .10 and .11, which shows that within two years it was the same, increased by 5 in 2009 but decline in 2010 by 8 percent and slightly went up in 2011. Its 5 years average was 13 percent.
  • Asset turnover ratio was .99, .98, .87, .64 and .81, with an average of .86. It shows that the company is effective in converting its assets into sales. It also shows that the asset turnover ratio is inversely related to net profit margin if asset turnover is high net margin is low and vice versa.
  • Return on asset was .13, .12, .16, .06 and .09. an average of .11.  It tells us that the average profit the company has generated for each $1 dollar of the asset was $0.11.
  • Return on equity was .19, .19, .21, .09 and .13. an average of .16, which tells us the average profit a company earned in each $1  of shareholder equity was $0.16.
  • Financial leverage was 1.46, 1.51, 1.34, 1.50 and 1.54. an average of 1.47. This is the ratio of assets to total stockholders’ equity.
  • Return on invested capital was .19, .19, .21, .09  and .13. average of .16.

Income

jstincome

  • Revenue was 120, 159, 159, 147 and 225. its ttm was 162.  The company’s revenue shows an up and downtrend in five years of operation. It increased by 32 percent in 2008, no growth in 2009, dropped by 7 percent in 2010, however it recovered and increased by 53 percent in 2011.
  • Its gross profit was 42, 51, 67, 57 and 82, with ttm of 60.  It also shows an up and downtrend on its growth. In 2008, its growth was 21 percent, in 2009, 31 percent, however, in 2010 it decreased by 15 percent but immediately recovered and 44 percent increased in 2011.
  • Operating income was 19, 23, 31, 15 and 27.  The trend of its growth was also the same with its revenue and gross profit wherein 2010 was its lowest and 2009 was its peak.
  • Income before tax was 19, 24, 32, 18 and 28. This is the company’s income before deduction of income tax.
  • Income after tax was 16, 20, 29, 14, and 24.  This is the net income of the company after applying the provision for income tax.

As noticed on the above data,  we have seen that its revenue grew year after year. Its peak was in 2011, the same trend was with Jinpan’s gross profit. However, operating income, income before tax and income after tax have the same trend of its growth, its peak was in 2009 while the lowest was in 2010.

Expenses

jstexpense

  • The cost of revenue of JST was 78, 109, 92, 90 and 142.  It represents 65, 68, 58, 61 and 63 percent of revenue.
  • Selling, general and admin was 23, 27, 36, 42 and 56, which are 19, 17, 23, 29 and 25 percent of revenue.
  • Income tax was 2, 3, 3, 4 and 3. It is 2, 2, 2, 3 and 1 percent of revenue.

Above table shows that the company’s expenses were within the normal level of each category. The business is satisfactorily handled and managed. It seems that Jinpan International Limited is on the good track.

Margin

jstmarg

Gross margin was .35, .32, .42, .39 and .36. The total average was .37. The result showed an up and down per year. It decreased by 3 percent in 2008, increased by 10 percent in 2009 then decreased again by 3 percent in 2010 and another 3 percent in 2011.

  • Operating margin was .16, .14, .19, .10 and .12.
  • Pretax margin was .16, .15, .20, .12 and .12. This is the income of the company before tax expressed in percentage.
  • Net profit margin was .13, .13, .18, .10 and .11. It is the net income of the company expressed in percentage. Its highest was in 2009 and the lowest in 2010 at 10 percent.

Based on records, the company’s highest gross margin was in 2009, and so with its operating margin, pretax margin and net profit margin. The least was in 2008 for gross margin and 2010 for operating margin, pretax margin and net profit margin.

Modified IS

jstmodi is

  • The above table shows that its revenue was not going up always that during 2010 it went down. The highest revenue was in 2011. Its total expenses were also fluctuating with the highest record was in 2011.
  • Resulted in a net income averaged of 21. Its peak record was in 2009 and with lowest in 2010.

JST company is well managed as far as its income statement is concerned. The company did not experience any negative result.

Cash Flow

jstcflow

Cash Flow from Operating Activities

jstcfo

  • Net income was 16, 20, 29, 14  and 24. ttm of 21,  this is the result of the normal day to day operation of the business. Its peak was in 2009.
  • Depreciation & amortization was 1, 2, 4, 4 and 4.
  • Accounts receivable was 0, -13, -6, -10 and  -32. ttm was -26.
  • Prepaid expenses were -3, 4, -5, -19 and 17. ttm of 21.
  • Other working capital was -10, -2, -2, 17 and -14
  • Other non-cash items was 1, 0, 0, 0 and 1.
  • So, its net cash provided by operating activities was  0, 18, 22, 2  and 4.   It was zero in 2007 but have enough balance in 2008 and 2009,  however, due to adjustments on prepaid expenses, accounts receivable and other working capital it resulted to a minimum balance in 2010 and 2011.

As shown in the above table, operating cash flow was used up in 2007, however, it was good in 2008 and 2009  having a positive result but dropped to a minimum balance in 2010 to 2011.  Transactions affecting operating cash flow aside from the net income were accounts receivable, prepaid expenses and other working capital.

Cash Flow from Investing Activities

jstcfi

  • Investment in PPE  was -7, -14, -8, -8 and -8.
  • Purchases of investments was -13, 0, 0, 0 and -2.
  • Purchase of Intangibles  was  0, -5, 0, 0 and -5.
  • And other investing in activities was 0.
  • Net cash for investing activities was -19, -19, -8, -8 and -15.  It shows a negative result throughout its five years of operation.

Data of JST shows that investing cash flow of the company resulted in a negative balance of its transactions involved cash outflows.  What are those? These were an investment in PPE, purchase of investments, purchase of intangibles and other investing activities.

Cash Flow from Financing Activities

jstcff

  • Debt issued was 0, 43, 12, 17 and 48.
  • Debt repayment  was 0, -42, -17, -5 and -39
  • Cash dividends paid was -2, -2, -2, -2 and -2.
  • Other financing activities was 3, 0, 1, 0, 0.
  • Net cash provided by financing activities was  1, -1, -6,  10 and  6.  Total cash inflow was 3, 43, 13, 17 and 48 which are debt issued other financing activities. While total cash outflow was -2, -44, -19, -7 and -41 consist of debt repayment and cash dividends paid which resulted in a net financing cash flow of 1, -1, -6, 10 and 6.

Free Cash Flow

jstfcf

Free cash flow was the net amount after deducting capital expenditure from operating cash flow. For the past five years, Jinpan International Limited’s free cash flow was -7, -1, 14, -7 and -9.  It shows that the company incurred a negative free cash flow in 2007, 2008 2010 and 2011 while in 2009, however, the company incurred a positive free cash flow of 14.

Written by Rio
Edited by Cris

Note:

Research Reports can be found under the company tab.