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PepsiCo Inc. – (NYSE: PEP) Profitability Analysis

Looking at profitability is a very important step in understanding a company. Profitability is essentially why the company exists, and a key component of deciding to invest or to remain invested in a company. There are many metrics involved in calculating profitability, but for this article, I will look at PepsiCo’s (PEP) earnings and earnings growth, profit margins, profitability ratios, and cash flow.

Through the above-mentioned four main metrics, we will be able to understand more about the company’s profitability. By comparing this summary to other companies in the same sector, you will be able see which has been the most profitable.

Earnings and Earnings Growth

1. Earnings = Sales x Profit Margin

  • 2010 – $57.838 billion x 10.93% = $6.320 billion
  • 2011 – $66.504 billion x 9.69% = $6.443 billion

PepsiCo’s earnings increased from $6.320 billion in 2010 to $6.443 billion in 2011, but the profit margin decreased.

2. Five-year historical look at earnings growth

  • 2007 – $5.682 billion, 10.54% increase over 2006
  • 2008 – $5.142 billion, 10.50% decrease
  • 2009 – $5.946 billion, 15.64% increase
  • 2010 – $6.320 billion, 6.29% increase
  • 2011 – $6.443 billion, 1.95% increase

In analyzing PepsiCo’s earnings growth over the past five years, you can see a positive earnings trend. Even though the company reported a down year in 2008, the overall trend is positive. Over the past five years, PepsiCo’s earnings have been increasing and have shown a 13.39% increase over its 2007 earnings.

To read more: Profitability Analysis Of PepsiCo

 

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