Keurig Dr Pepper Inc (KDP)

Conclusion

Keurig Dr Pepper owns, manufactures and distributes non-alcoholic beverages and single-serve brewing systems in the United States and abroad, with brands such as Dr Pepper, Canada Dry, Green Mountain Coffee Roasters and Snapple. On 9 November 2026 the shares closed at 36.94 USD, giving a market capitalisation of 50.27 billion USD.

The verdict is fair. The price-to-earnings ratio of 30.5 sits 8.4% above its ten-year median of 28.2, while enterprise value to EBITDA of 16.1 is 6.8% below its median of 17.3. The discounted cash flow gives 40.26 USD per share at a discount rate of 8.87%. The fair value band runs from 30.69 to 46.03 USD with a midpoint of 38.36 USD, and the margin of safety is 3.9%. The reverse discounted cash flow implies 7.1% annual growth, against revenue growth of 7.4% a year over five years, but free cash flow per share fell 4.1% a year over the same period.

What holds the case up is free cash flow conversion of 141.4% on a trailing basis, a Piotroski score of 7 out of 9, and a five-year share count change of -0.85% a year. What would break it is net debt at 5.7 times EBITDA, interest coverage of 2.8 times and a current ratio of 0.52. Return on invested capital of 5.4% also sits below the weighted average cost of capital of 7.0%.

Financial health

Financial strength is red, held back by weak liquidity and heavy debt, with no metric assessed as good. The current ratio is 0.52 and the quick ratio 0.21, so short-term assets cover only part of short-term obligations. Net debt stands at 5.7 times trailing EBITDA, debt to equity at 1.14 and interest coverage at 2.8 times. The Altman Z-score of 0.90 falls in the distress zone. Insolvency risk: low, about 0.4% by the estimate of the Ohlson model over one to two years. Taken together, the balance sheet leaves little room for a downturn in earnings.

Earnings quality

Earnings quality is green, supported by strong cash conversion and a low likelihood of manipulation. Free cash flow equalled 141.4% of earnings on a trailing basis and 95.7% on average over five years. The accrual ratio is 0.16%, and stock-based compensation is 0.53% of revenue, leaving free cash flow after it at 2.21 billion USD. The share count fell at a compound rate of 0.85% over five years, which points to buybacks. The Piotroski score is 7 out of 9 and the Beneish M-score of -2.51 reads as unlikely to signal manipulation. The company beat earnings estimates in six of the last eight quarters, with an average surprise of 4.7%. Estimate revisions are mixed: for the current year, two estimates rose and three fell in the last 30 days.

Profitability

Profitability is yellow: margins are well below their own history, although returns are still close to the cost of capital. The gross margin of 48.0% compares with a ten-year median of 55.3%, the operating margin of 16.1% with a median of 21.5%, and the net margin of 7.1% with a median of 12.0%. Margin stability over the year was 7.9%. Return on invested capital is 5.4% against a weighted average cost of capital of 7.0%, a given gap of -1.6%, and its five-year median is 6.3%. Return on equity of 6.5% is flattered by leverage: the DuPont split for 2025 shows an equity multiplier of 2.17 alongside an asset turnover of 0.30.

Growth

Growth is green, driven by steady revenue and earnings per share, although free cash flow per share has shrunk. Revenue compounded at 5.7% over three years, 7.4% over five and 10.2% over ten, and it grew in all ten of the last ten years. Earnings per share compounded at 14.9% over three years, 10.4% over five and 6.8% over ten. Free cash flow per share fell at 13.7% a year over three years and 4.1% over five, though it rose 2.7% over ten. Analysts expect next-year earnings per share to grow by 10.5%.

Valuation

Valuation is yellow: the shares trade near their historical multiples, and the fair value band brackets the current price. The price-to-earnings ratio of 30.5 carries a premium of 8.4% over its ten-year median of 28.2. The price-to-free-cash-flow ratio of 21.6 has a premium of 1.3% against its median of 21.3, and the price-to-book ratio of 2.0 a premium of 3.7%. Enterprise value to EBITDA of 16.1 is at a discount of 6.8%, and price to sales of 2.2 at a discount of 35.3%. The discounted cash flow gives 40.26 USD per share at a discount rate of 8.87%, and 59% of its value sits in the terminal value, so it should be read with caution. The fair value from historical multiples is 36.47 USD. The dividend yield is 2.7% and the payout on free cash flow 58.3%.

Risks

The main risk is leverage: net debt at 5.7 times EBITDA and interest coverage of 2.8 times leave little margin if earnings fall, and refinancing costs could rise. Liquidity is thin, with a current ratio of 0.52, which makes the company dependent on steady cash flow. Returns below the cost of capital mean that growth adds little value unless margins recover from 16.1% towards their median of 21.5%. The discounted cash flow depends heavily on its terminal value. The company does not report a debt maturity schedule or revenue by segment in these figures, so the timing of repayments and the contribution of each division cannot be assessed here. This analysis rests on the figures above and does not reflect any events after the dates shown.