PepsiCo acquires Poppi for $1.95 billion

PepsiCo is a well-known company that has increased its dividends for over 50 years. This strong track record shows that it has a solid business model. Recently, PepsiCo announced it will buy Poppi, a company that makes prebiotic soda, for $1.95 billion. This move suggests that PepsiCo is still executing its strategy well, even during tough times. Currently, PepsiCo's stock has a dividend yield of 3.5%, which is one of the highest in its history. However, investors seem to be undervaluing the stock, putting it on “discount.” This is reflected in different valuation metrics. For instance, PepsiCo's price-to-sales ratio is about 2.3 times, lower than its five-year average of roughly 2.7 times. Its price-to-earnings ratio is also lower than its historical average. PepsiCo has faced challenges as its growth has slowed since post-pandemic times. Despite this, the company is taking steps to address these issues. In 2024, it started revitalizing its brand portfolio by purchasing several companies, including Sabra and Siete. The acquisition of Poppi is the largest of these efforts. These purchases are part of PepsiCo’s strategy to stimulate growth through its extensive distribution network. Investors looking for long-term options may find PepsiCo’s current stock attractive. Although there are challenges, PepsiCo's management is focused on improving the company’s performance. If the stock prices rise in the future, it might not be as cheap as it is now. Therefore, it could be wise for investors to consider buying shares before that happens.