Taking Stock of Pernod Ricard (ENXTPA:RI)’s Valuation After Barclays’ Overweight Upgrade

Barclays has just upgraded Pernod Ricard (ENXTPA:RI) to overweight, arguing the spirits group looks mispriced given reduced China exposure, improving India dynamics, and a long runway in the U.S. and Indian markets.

See our latest analysis for Pernod Ricard.

The upgrade lands after a tough stretch, with a roughly 30 percent year to date share price decline and a three year total shareholder return of about negative 54 percent, but today’s bounce hints that sentiment may be starting to turn.

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With shares trading at a steep discount to analyst targets despite mid single digit earnings growth and structural tailwinds in the U.S. and India, is Pernod Ricard now a mispriced recovery play, or is the market correctly discounting its future growth?

Most Popular Narrative Narrative: 26.8% Undervalued

With Pernod Ricard closing at €75.46 against a most popular narrative fair value of €103.06, the implied upside hinges on specific long term assumptions.

The analysts have a consensus price target of €110.368 for Pernod Ricard based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €156.0, and the most bearish reporting a price target of just €87.0.

Read the complete narrative.

Want to see what justifies that gap between bullish and bearish views? The answer lies in a tight mix of margin upgrades, muted revenue expectations, and a future earnings multiple that still trails many global beverage peers. Curious which detailed forecasts pull all of that into a higher fair value than today’s price?

Result: Fair Value of €103.06 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent revenue softness in key markets and tougher pricing conditions could easily derail the premiumization and margin expansion story embedded in today’s targets.

Find out about the key risks to this Pernod Ricard narrative.

Build Your Own Pernod Ricard Narrative

If you see the story differently or want to stress test the numbers yourself, you can build a fully custom view in just minutes: Do it your way.

A great starting point for your Pernod Ricard research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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