At today's price, PepsiCo's stock is pricing in about 10.2% annual free-cash-flow growth for the next ten years. Over the past five years, the company's actual FCF grew just 3.5% a year — roughly a third of what the market is now asking for.
At its current price, PEP implies ~10.2% annual FCF growth for the next 10 years, discounted at 9%.
PepsiCo's actual 5-year FCF growth has averaged just 3.5% a year.
Required growth vs. historical growth
Required growth from the reverse DCF below. Historical CAGRs from 10-K FY2021–FY2025 cash flow and income statements. Analyst forecast from stockanalysis.com (Aug 19, 2026).
Sensitivity: what if the discount rate moves?
| WACC | Required growth |
|---|---|
| 7% | 5.15% |
| 9% (base case) | 10.20% |
| 11% | 14.44% |
Even at the lowest discount rate tested (7%), the required growth rate is 5.15% — still above the 5-year actual FCF pace of 3.5%.
What would move this number
- Using a three-year average FCF ($7.95B) instead of FY2025 alone ($8.20B) actually raises the required growth rate slightly, to 10.61% — a lower starting base requires faster growth to reach the same target.
- Net debt is calculated here as total debt minus cash and short-term investments ($39.65B); a broader definition (including pension liabilities, for example) would raise the required growth rate further — debt has grown from $40.3B (2021) to $49.2B (2025), partly from the poppi and Siete acquisitions.
- Changing the terminal growth rate (2.0% vs. 3.0%) shifts the required growth rate modestly in either direction, but doesn't flip the overall conclusion.
Show your work
Inputs, sources, model assumptions, and the calculation
- Share price$140.13 — stockanalysis.com, Aug 18, 2026 close
- Diluted shares outstanding~1.369B — 10-Q Q2 FY2026, weighted-average diluted shares
- Market cap$191.84B — price × diluted shares (calculated)
- Total debt$49.18B — 10-K FY2025 balance sheet (year-end 2025)
- Cash + short-term investments$9.53B — 10-K FY2025 balance sheet
- Net debt$39.65B — calculated
- Base FCF (FY2025)$8.20B — 10-K FY2025 FCF reconciliation, p.49
- 3-year average FCF (2023-2025)$7.95B — 10-K FY2025/FY2024 FCF reconciliation
- Discount rate (WACC)9% base case (7%/11% tested)
- Terminal growth rate2.5% — long-run GDP-level assumption
Normalization check: FY2025's FCF ($8.20B) is +3.1% above the three-year average ($7.95B) — within the ±40% threshold, so used as-is without adjustment.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's enterprise value (market cap + net debt).
The fine print
- Change the discount rate, the FCF base, the projection window, or the terminal growth rate, and the answer moves — see the sensitivity table above.
- A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
- Whether 10.2% growth is realistic depends on new-product contribution (poppi, Siete), tariff policy, and margin recovery — not on this math alone.
- Any investment decision, and its outcome, is your own responsibility.
Frequently asked questions
What growth rate does PEP's stock price assume?
At today's price, PepsiCo's stock is pricing in about 10.2% annual free-cash-flow growth for the next ten years.
How does that compare to PepsiCo's actual growth?
Over the past five years, PepsiCo's actual free-cash-flow growth was just 3.5% a year — roughly a third of the ~10.2% the current price requires.
What share price was used for this analysis?
This analysis used $140.13, as of Aug 18, 2026.