PepsiCo PEP FAIRLY VALUED Buying Index™ 7 Value Rating

Valuentum Retail Equity Research Ratings as of 16-Apr-2021 Data as of 15-Apr-2021

Buying Index™ 7 Value RatingEconomic Castle

Attractive

Investment ConsiderationsDCF ValuationRelative Valuation

Stock Chart (weekly) ValueCreation™ValueRisk™ValueTrend™Cash Flow GenerationFinancial LeverageGrowthTechnical EvaluationRelative StrengthMoney Flow Index (MFI)Upside/Downside Volume (U/D)Near-term Technical Support, 10-week MADCF = Discounted Cash Flow; MFI, U/D = Please see glossary. MA = Moving Average

Business Quality ValueCreation™

ValueRisk™ Very Poor Poor Good ExcellentCompany Vitals Investment HighlightsMarket Cap (USD) $197,761Avg Weekly Vol (30 wks) 22,07930-week Range (USD) 128.32 - 148.77Valuentum Sector Consumer Staples5-week Return 4.7%13-week Return 2.9%30-week Return 4.4%Dividend Yield % 2.9% Firms that generate economic profits with little operating variability score near the top right of the matrix.

Dividends per Share 4.09 Relative Valuation Forward P/E PEG Price / FV

Forward Dividend Payout Ratio 66.9% Coca-Cola 34.3 1.5 128.0%Est. Normal Diluted EPS 8.14 Procter & Gamble 23.9 2.9 130.8%P/E on Est. Normal Diluted EPS 17.5 Philip Morris 15.4 2.4 104.3%Est. Normal EBITDA 18,335 Wal-Mart 26.8 2.3 130.2%Forward EV/EBITDA 15.8 Peer Median 25.4 2.4 129.1%EV/Est. Normal EBITDA 12.7 PepsiCo 23.3 1.7 105.2%Forward Revenue Growth (5-yr) 5.5% Price / FV = Current Stock Price divided by Estimated Fair Value

Forward EPS Growth (5-yr) 16.1% Financial Summary ProjectedNMF = Not Meaningful; Est. = Estimated; FY = Fiscal Year

Fiscal Year End: Dec-19 Dec-20 Dec-21

Returns Summary 3-year Historical Average Revenue 67,161 70,372 75,157Return on Equity 66.7% Revenue, YoY% 3.9% 4.8% 6.8%Return on Assets 11.2% Operating Income 10,291 10,080 11,862ROIC, with goodwill 16.2% Operating Margin % 15.3% 14.3% 15.8%ROIC, without goodwill 24.0% Net Income 7,314 7,120 8,425ROIC = Return on Invested Capital; NMF = Not Meaningful Net Income Margin % 10.9% 10.1% 11.2%Leverage, Coverage, and Liquidity Diluted EPS 5.20 5.11 6.11In Millions of USD Diluted EPS, YoY % -40.8% -1.6% 19.5%Total Debt 44,150 Free Cash Flow (CFO-capex) 5,417 6,373 7,079Net Debt 34,599 Free Cash Flow Margin % 8.1% 9.1% 9.4%Total Debt/EBITDA 3.5 In Millions of USD (except for per share items)

Net Debt/EBITDA 2.7 LARGE-CEBITDA/Interest 11.2 GOODCurrent Ratio 1.0Quick Ratio 0.8

• Pepsi is a Dividend Aristocrat that has increased itspayout over the past 45+ consecutive years. Thecompany's free cash flow generating abilities areimpressive though its net debt load is rather large.Pepsi's international growth runway is immense.

NMF = Not Meaningful

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

Structure of the Nonalcoholic Beverages IndustryThe nonalcoholic beverage segment of the commercial beverage industry is highly competitive, consisting of numerous companies that make various sparkling beverages, water products, juices, fruit drinks, energy and other performance-enhancing drinks. Pricing, advertising, product innovation, the availability of in-store private-label beverages, and health concerns about sugar-sweetened beverages are key drivers that impact demand. Leading brands with high levels of consumer acceptance and an expansive distribution network are sources of competitive strengths. We like the structure of the group.

• Pepsi generates a little over half of its revenues fromsnacks and little under half of its revenues frombeverages. Most of its revenues are generated indeveloped markets, though Pepsi has a long growthrunway in emerging and developing markets.

• We're huge fans of Pepsi's brand portfolio, butcompetition remains fierce. Coca-Cola is its primarybeverage competitor, while food and beverage rivalsinclude Nestlé, Danone, Kellogg, General Mills, andMondelēz. Pepsi has a scale advantage in NorthAmerica, however, and has ~23 global brands thateach bring in $1 billion in sales annually.

----- Actual -----

• Pepsi aims to generate long-term organic revenuegrowth of 4%-6% annually, aided by its marketinginitiatives. Investments in automation and thedigitization of its supply chain and selling operationsare expected to help expand the company’s coreoperating margin over the coming years.

Medium

High

Low 1• Pepsi is a global food/beverage company with aplethora of respected brands. Its portfolio includes thenamesake Pepsi, Mountain Dew, Gatorade, Lay's,Doritos, Cheetos, Tostitos, Ruffles, Quaker oatmeal,and Cap'n Crunch, among others. North Americaaccounts for ~60% of its sales. The company wasfounded in 1898 and is headquartered in New York. Very High

BULLISHWEAK

NEUTRALBULLISH

137.00

The week with the highest trading volume out of the last 30 weeks was a week of heavy selling, or distribution (red bar).

EXCELLENTLOW

POSITIVESTRONG

HIGHMODEST

Pepsi expects that both the global beverage and global snack markets will grow by mid-single-digits annually in the medium-term. FAIRLY VALUED

ATTRACTIVE

Industry $135.00 $108.00 - $162.00 LARGE-CAP CORE Consumer Staples Recession Resistant

Visit us at www.valuentum.com

PepsiCo PEP FAIRLY VALUED Estimated Fair Value Fair Value Range Investment Style Sector

109.00

114.00

119.00

124.00

129.00

134.00

139.00

144.00

149.00

154.00

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

Valuentum Retail Equity Research (10=best) Data as of 15-Apr-2021


Attractive

Economic Profit Analysis

ValueCreation™ EXCELLENT Return on Invested Capital (ROIC)

ROIC - WACC Spread, 3-year historical average 15.0%ROIC - WACC Spread, 5-year projected average 20.2%These spreads equal the firm's annual average ROIC (excluding goodwill) less its WACC.

ValueTrend™ POSITIVE

Weighted Average Cost of Capital (WACC) The graph above shows the firm's ROIC (excluding goodwill) compared with historical averages and its WACC.

ROIC CalculationFiscal Year End: Dec-18 Dec-19 Dec-20

Earnings before InterestOperating Income after Depreciation 10,110 10,291 10,080- Adjusted Taxes (at 21% of EBIT) 2,123 2,161 2,117+ Amortization 0 0 0+ Non-cash Operating Items -1,206 -136 890- Minority Interest 44 39 55Earnings before Interest 6,737 7,955 8,798

Cost of Equity Invested CapitalRisk Free Rate Assumption Inventories 3,128 3,338 4,172Fundamental Beta (ERP multiplier) + Receivables 7,142 7,822 8,404Estimated Equity Risk Premium + Current Deferred Income Taxes 0 0 0Cost of Equity Assumption + Other Current Assets 633 747 874

+ Property, Plant and Equipment, Net 17,589 19,305 21,369After-tax Cost of Debt + Goodwill, Net (Cost in Excess) 14,808 15,501 18,757Risk Free Rate Assumption + Intangibles 15,825 16,043 19,315Synthetic Credit Spread + Non Current Deferred Income Taxes 4,364 4,359 4,372Cost of Debt Assumption - Accounts Payable 7,213 17,541 19,592Cash Tax Rate Assumption - Other Current Liabilities 4,296 0 0After-tax Cost of Debt Assumption

Invested Capital, with goodwill 51,980 49,574 57,671Cost of Preferred Stock Invested Capital, without goodwill 37,172 34,073 38,914Preferred DividendsValue of Preferred Stock Return on Invested Capital, with goodwill 15.4% 16.8% 16.4%Cost of Preferred Assumption Return on Invested Capital, without goodwill 23.2% 24.6% 24.1%

In Millions of USD

Weighted Average Cost of Capital (WACC)ERP = Equity Risk Premium

Note: Valuentum may provide an adjusted ROIC measure to better reflect the economic substance of a company's operations, as in the case of companies with negative invested capital.


21.0%6.3%

00

NA

8.9%

0.86.5%9.5%

4.3%3.67%

8.0%

PepsiCo receives a ValueTrend™ rating of POSITIVE, which is based on thecompany's trailing three-year performance. The firm's ROIC (excluding goodwill)increased to 24.1% last year from its trailing 3-year average of 24%. We expect ROIC(excluding goodwill) to be in the ballpark of about 35% by the end of our discreteforecast period, with upside potential to about 44% over that time period.

---------- Actual ----------

4.3%

$135.00 $108.00 - $162.00 LARGE-CAP CORE Consumer Staples Recession Resistant

The best measure of a firm's ability to create value for shareholders is expressed bycomparing its return on invested capital (ROIC) with its weighted average cost ofcapital (WACC). The gap or difference between ROIC and WACC is called the firm'seconomic profit spread. PepsiCo's 3-year historical return on invested capital (withoutgoodwill) is 24%, which is above the estimate of its cost of capital of 8.9%. As such,we assign the firm a ValueCreation™ rating of EXCELLENT. In the chart to the right,we show the probable path of ROIC in the years ahead based on the estimated volatilityof key drivers behind the measure. The solid grey line reflects the most likely outcome,in our opinion, and represents the scenario that results in our fair value estimate.

PepsiCo PEP FAIRLY VALUED Estimated Fair Value Fair Value Range Investment Style Sector Industry

44.1%

35.4%

23.2%24.6% 24.1%

26.8%

WACC, 8.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

81.7%

18.3%Equity

Debt

Preferred

Capital Structure



Attractive

Growth Analysis

Revenue Growth MODEST Projected Revenue (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year

Revenue3-year Historical

CAGR5-year Projected

CAGRPepsiCo USD 70,372 3.5% 5.5%

Coca-Cola USD 37,266 -3.8% 2.8%

Procter & Gamble USD 70,950 2.9% 4.8%

Philip Morris USD 29,805 3.8% 3.4%

Wal-Mart USD 523,964 2.5% 2.9%

Peer Median 2.7% 3.1%

Industry Median 3.5% 3.4%

In the chart above, we show our baseline forecast for revenue as well as potential upside and downside cases.

EBITDA Growth Projected EBITDA (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year

EBITDA3-year Historical

CAGR5-year Projected

CAGRPepsiCo USD 12,628 -0.7% 12.6%

Coca-Cola USD 11,909 4.6% 5.9%


Philip Morris USD 11,495 -0.2% 6.2%

Wal-Mart USD 31,555 -1.3% 7.6%



In the chart above, we show our baseline forecast for EBITDA as well as potential upside and downside cases.

Net Income Growth Projected Net Income (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year Net Income

3-year Historical CAGR

5-year Projected CAGR

PepsiCo USD 7,120 13.6% 14.9%

Coca-Cola USD 8,920 11.0% 3.7%



Wal-Mart USD 12,923 -1.8% 12.6%



In the chart above, we show our baseline forecast for net income as well as potential upside and downside cases.

PepsiCo's EBITDA expansion has trailed both that of its peer group and its industrygroup during the past three years. We expect the firm's EBITDA expansion to outpaceits peer group and industry group during the next five years. PepsiCo sports the highestexpected EBITDA growth rate among peers.

PepsiCo's net income expansion has been greater than that of both its peer group andindustry group during the past three years. We expect the firm's net income expansionto outpace its peer group and industry group during the next five years. PepsiCo sportsthe highest expected net income growth rate among peers.



PepsiCo's revenue expansion has been greater than the median of its peer group but hasbeen in line with that of its industry group during the past three years. We expect thefirm's revenue expansion to outpace the median of its peer group and industry groupduring the next five years. Our growth assessment of each firm is based on the firm's 5-year forward revenue CAGR. PepsiCo's future pace of revenue growth is MODEST, inour opinion.


64,661 67,161 70,372

96,736

91,78786,838

0

20,000

40,000

60,000

80,000

100,000

120,000

12,509 12,723 12,628

23,254

22,90022,547

0

5,000

10,000

15,000

20,000

25,000

12,515

7,314 7,120

22,348

14,245

6,141

0

5,000

10,000

15,000

20,000

25,000



Attractive

Cash Flow and Financial Leverage AnalysisCash Flow Generation STRONG Financial Leverage HIGH

The bars above show the firms operating cash flow, capital expenditures, and free cash flow, respectively. The bars above show the firm's annual debt-to-EBITDA. The red line shows the firm's normalized measure.

Cash Flow from Operations Projected Operating Cash Flow (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year CFO


5-year Projected CAGR

PepsiCo USD 10,613 2.0% 12.4%

Coca-Cola USD 10,471 6.0% 6.0%



Wal-Mart USD 25,255 -7.3% 8.7%



In the chart above, we show our baseline forecast for CFO as well as potential upside and downside cases.

Free Cash Flow (CFO-capital expenditures) Projected Free Cash Flow (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year FCF


5-year Projected CAGR Source: Company Filings, Valuentum Projections

PepsiCo USD 6,373 -3.2% 17.7%

Coca-Cola USD 8,417 8.8% 8.1%



Wal-Mart USD 14,550 -11.6% 12.0%



In the chart above, we show our baseline forecast for free cash flow as well as potential upside and downside cases.

PepsiCo's cash flow from operations expansion has trailed both that of its peer groupand its industry group during the past three years. We expect the firm's cash flow fromoperations expansion to outpace its peer group and industry group during the next fiveyears. PepsiCo sports the highest expected cash flow from operations growth rateamong peers.

PepsiCo's free cash flow expansion has trailed both that of its peer group and itsindustry group during the past three years. We expect the firm's free cash flowexpansion to outpace its peer group and industry group during the next five years.PepsiCo sports the highest expected free cash flow growth rate among peers.



Firms that generate a free cash flow margin (free cash flow divided by total revenue)above 5% are usually considered cash cows. PepsiCo's free cash flow margin hasaveraged about 8.9% during the past 3 years. As such, we think the firm's cash flowgeneration is relatively STRONG. The free cash flow measure shown above is derivedby taking cash flow from operations less capital expenditures and differs fromenterprise free cash flow (FCFF), which we use in deriving our fair value estimate forthe company. For more information on the differences between these two measures,please visit our website at Valuentum.com. At PepsiCo, cash flow from operationsincreased about 13% from levels registered two years ago, while capital expendituresexpanded about 29% over the same time period.

Firms that exhibit high leverage tend to be more risky than firms with relatively lowdebt loads, all else equal. We measure financial leverage by taking a firm's currenttotal debt load and dividing it by the firm's trailing average 3-year annual EBITDA.Firms that are over 3 for this metric, we rate as having high leverage. Companies thathave less than 1.5 turns of leverage (or a measure below 1.5), we rate as having lowleverage. PepsiCo's normalized debt-to-EBITDA measure of about 3.5 puts it in theHIGH camp.


9,415 9,64910,613

3,2824,232 4,240

6,1335,417

6,373

Dec-18 Dec-19 Dec-20

Cash from Operations Capital Expenditures Free Cash Flow PepsiCo -normalized

leverage, 3.50

0

1

2

3

4

12/31/2018 12/31/2019 12/31/2020

PepsiCo- annual leverage PepsiCo - normalized leverageMedium Threshold HighThreshold

9,415 9,64910,613

20,168

19,00317,837

0

5,000

10,000

15,000

20,000

25,000

6,1335,417

6,373

16,290

14,413

12,536

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000



Attractive

Valuation Analysis

Valuation Assumptions Valuation BreakdownIn Millions of USD (except for per share items)

Revenue CAGR %Avg. EBIT Margin %Avg. Cash Tax Rate %Earnings Before Interest CAGR %Earnings Per Share CAGR %Free Cash Flow to the Firm CAGR %Earnings before interest = Net operating profits less adjusted taxes

Phase II --> III FCFF CAGR % 3.4% (II) 3% (III)Cost of Equity %After-tax Cost of Debt %Discount Rate (WACC) %Synthetic credit spread = 3.667%

Phase I Present ValuePhase II Present ValuePhase III Present ValueTotal Firm Value

Net Balance Sheet Impact

Total Equity ValueDiluted Shares OutstandingFair Value per Share

DCF Valuation Summary Enterprise Free Cash FlowFiscal Year End: 12/31/2018 12/31/2019 12/31/2020

6,737 7,955 8,7982,399 2,432 2,5483,282 4,232 4,240-308 -5,142 -635

- Acquisitions 299 2,717 6,3725,863 8,580 1,369

In Millions of USD

Source: Company Filings, Valuentum Projections

Company NameValuentum Buying

Index™Forward Price-to-

Earnings

Price/Earnings-to-Growth (PEG), 5-

yearEV/Est. Normal

EBITDA

5-year Forward Earnings per Share CAGR

3-year Hist Avg ROIC, without

goodwillDividend Yield

%

Stock Price / Fair Value Estimate

PepsiCo 7 23.3 1.7 12.7 16.1% 24.0% 2.9% 105.2%

Coca-Cola 4 34.3 1.5 18.4 4.7% 40.9% 3.3% 128.0%

Procter & Gamble 4 23.9 2.9 15.2 9.6% 32.5% 2.5% 130.8%

Philip Morris 6 15.4 2.4 10.3 7.2% 79.7% 6.1% 104.3%

Wal-Mart 4 26.8 2.3 11.8 13.7% 21.4% 1.5% 130.2%

Peer Median 4.0 25.4 2.4 13.5 8.4% 36.7% 2.9% 129.1%

Industry Median 5.0 25.9 2.3 12.4 11.2% 24.0% 2.2% 111.8%

View back of report for a full list of industry constituents covered by Valuentum. VBI: Valuentum's ranking for the attractiveness of this investment at the date of the report.


21.5 13.5

21.0 15.2

18.5 15.7

23.5 24.8

20.4 16.9

13.2 11.9

Company Metrics versus Peer and Industry Medians

P/E on Est. Normal Diluted EPS Forward EV/EBITDA

17.5 15.8

In addition to the firm's cap structure, the net balance sheet impact considers the funded status of the firm's pension (-981). In Millions of USD

---------- Actual ----------

We think PepsiCo is worth $135 per share with a fair value range of $108.00 -$162.00. The margin of safety around our fair value estimate is driven by the firm'sLOW ValueRisk™ rating, which is derived from an evaluation of the historicalvolatility of key valuation drivers and a future assessment of them. Our near-termoperating forecasts, including revenue and earnings, do not differ much from consensusestimates or management guidance. Our model reflects a compound annual revenuegrowth rate of 5.5% during the next five years, a pace that is higher than the firm's 3-year historical compound annual growth rate of 3.5%. Our model reflects a 5-yearprojected average operating margin of 18%, which is above PepsiCo's trailing 3-yearaverage. Beyond year 5, we assume free cash flow will grow at an annual rate of 3.4%for the next 15 years and 3% in perpetuity. For PepsiCo, we use a 8.9% weightedaverage cost of capital to discount future free cash flows.

Earnings before Interest+ Depreciation - Capital Expenditures - Change in Working Capital

Enterprise Free Cash Flow (FCFF)

Our future forecasts for key valuation drivers result in a future free enterprise cashflow stream. Above, we show how we calculate enterprise free cash flow and thehistorical performance of the metric for PepsiCo. Over the next five years, we expectthe firm's enterprise free cash flow to expand at about a 62% compound annualgrowth rate. During years 6 through 20, we expect the measure to grow at a 3.4%rate. Beyond year 20 (in perpetuity), we grow the firm's free cash flow at inflation(3%).

-35,580

187,7231,392.0$135.00

102,38778,724

223,303

8.9%Results42,192

13.0%16.1%61.9%

Long-term Projections

9.5%6.3%


5-year Projections In the chart below, we show the build up to our estimate of total enterprise value forPepsiCo and the break down to the firm's total equity value, which we estimate to beabout 187.72USD billion. The present value of the enterprise free cash flowsgenerated during each phase of our model and the net balance sheet impact, whichconsiders the firm's pension, is displayed. We divide total equity value by dilutedshares outstanding to arrive at our $135 per share fair value estimate.

5.5%18.0%21.0%


42,192

102,387

78,72435,580

187,723

0

50,000

100,000

150,000

200,000

250,000

Yr 1-5 Yr 6-20 Perpetuity Net Balance SheetImpact

Equity Value



Attractive

Margin of Safety Analysis

Range of Potential Outcomes ValueRisk™ LOW

Revenue Volatility 4.3%Gross Margin Volatility 4.2%Earnings (EBI) Volatility 19.6%Cash Flow (FCFF) Volatility Greater than 50%Fair Value Range 20.0%The Fair Value Range sets the premium or discount on our estimate of the firm's fair value.

Upside and Downside ProbabilitiesProbability (fair value < $0) Less than 0.1%Probability (fair value > 2x current share price) 0.00%

Future Path of Fair Value

The graph above shows the expected future fair value of the firm's shares relative to its current stock price.

Our discounted cash flow process values each firm on the basis of the present value ofall future free cash flows. Although we estimate the firm's fair value at about $135 pershare, every company has a range of probable fair values that's created by theuncertainty of key valuation drivers (like future revenue or earnings, for example). After all, if the future were known with certainty, we wouldn't see much volatility in themarkets as stocks would trade precisely at their known fair values. Our ValueRisk™rating sets the margin of safety or the fair value range we assign to each stock. In thegraph above, we show this probable range of fair values for PepsiCo. We think the firmis attractive below $108 per share (the green line), but quite expensive above $162 pershare (the red line). The prices that fall along the yellow line, which includes our fairvalue estimate, represent a reasonable valuation for the firm, in our opinion.

We strive to answer a few questions that investors often ask: 1) What are the chancesof a total loss of investment in this company? and 2) What is the chance that thecompany is really worth twice what I paid for it? The probability (fair value < 0)strives to answer the first question. It indicates the chance that the firm mayencounter insolvency based on the characteristics of its cash flow stream, capitalstructure, and risk profile. The probability (fair value > 2x current share price) strivesto answer the second question. It is our best estimate of whether investors areparticipating in a half-off sale by buying the company's shares at current prices.

We estimate PepsiCo's fair value at this point in time to be about $135 per share. Astime passes, however, companies generate cash flow and pay out cash to shareholdersin the form of dividends. The chart to the right compares the firm's current share pricewith the path of PepsiCo's expected equity value per share over the next three years,assuming our long-term projections prove accurate. The range between the resultingdownside fair value and upside fair value in Year 3 represents our best estimate of thevalue of the firm's shares three years hence. This range of potential outcomes is alsosubject to change over time, should our views on the firm's future cash flow potentialchange. The expected fair value of $164 per share in Year 3 represents our existing fairvalue per share of $135 increased at an annual rate of the firm's cost of equity less itsdividend yield. The upside and downside ranges are derived in the same way, but fromthe upper and lower bounds of our fair value estimate range.



PepsiCo receives a ValueRisk™ rating of LOW based of the historical volatility ofkey drivers of economic value creation. The fair value range sets the margin of safetyaround our fair value estimate of the firm's shares.


$108

$135

$162

0 50 100 150 200 250 300

$196

$164Current Share Price, $142

$131

$0

$50

$100

$150

$200

$250

Current Share Price Yr 1 Fair Value Yr 2 Fair Value Yr 3 Fair Value



Attractive

Technical Analysis

Technical Evaluation BULLISH Money Flow Index (MFI) NEUTRAL

30-week Price and Volume Chart (weekly)Relative Price Strength WEAK

5-week Company Performance 4.7%5-week Market Benchmark Performance 1.4%5-week Relative Performance vs. Market Benchmark 3.3%13-week Company Performance 2.9%13-week Market Benchmark Performance 5.6%13-week Relative Performance vs. Market Benchmark -2.7%30-week Company Performance 4.4%30-week Market Benchmark Performance 12.0%30-week Relative Performance vs. Market Benchmark -7.6%

Upside/Downside Volume BULLISH Timeliness Matrix™ Equity Valuation

Relative Strength

Firms that are undervalued and currently showing near-term pricing strength score near the top right of the matrix.


Weak 1Companies that are undervalued and showing near-term relative price strength couldrepresent timely buys, as the stock may be attractive to both value and momentuminvestors. A cross section of the firm's equity valuation and its relative share pricestrength is shown in the matrix above. We tend to prefer undervalued stocks that have strong pricing momentum, also called Valuentum stocks.

The level and trend of the Upside/Downside (U/D) volume ratio reveals whetherinstitutional participation has been bullish or bearish as of late. PepsiCo's U/D volumeratio of 1 is not only greater than 1 but also is better than its trailing average, indicatingBULLISH institutional interest during the past several weeks.

Strong

Neutral

The firm's near-term moving average (5-week, grey line) and medium-term movingaverage (13-week, red line) are shown in the chart above. Typically, when a shorter-term moving average crosses a medium- or longer-term moving average from below, itrepresents a bullish signal. If the short-term moving average crosses from above, tradersoften view this as bearish. PepsiCo's 5-week moving average resides above its 13-weekmeasure, indicating a BULLISH trend. Such a move could indicate a reversal in thefirm's 30-week downtrend.

The Money Flow Index (MFI) is an oscillator that uses price and volume to measurebuying and selling pressure. Chartists often look for overbought (above 80) andoversold (below 20) levels to warn of unsustainable near-term price extremes.PepsiCo's MFI of 60 is neutral, suggesting the firm's stock is neither overbought noroversold at this time. However, a score over 50 tends to favor bulls. The MFI can alsobe used to gauge the strength or weakness of a firm's price trend. In PepsiCo's case,its stock price and money flow neither reveals a bullish nor bearish divergence,further supporting our neutral view on its money flow action.

A firm's relative price strength can be assessed over any number of time horizons. Weshow the firm's performance over the past 5 weeks, 13 weeks, and 30 weeks below.In arriving at our relative strength rating for each company, we assess the past 13weeks, which includes the market's reaction to the firm's most recently reportedquarter, where applicable, and other more recent economic events. During the past 13weeks, PepsiCo's shares returned 2.9%, while the market benchmark returned 5.6%.We think PepsiCo's 13-week relative price performance is WEAK.

In the chart above, we pinpoint the heaviest accumulation or distribution week of thefirm, determined by the week with the highest trading volume during the past 30 weeks.A heavy accumulation (buying) or distribution (selling) week often determines thefuture near-term direction of the firm's share price, as money managers continue tomove in or out of the stock in the days and weeks ahead driving the stock up or down,respectively. For PepsiCo, the week with the highest trading volume out of the last 30weeks was a week of heavy buying, or accumulation (green bar). Such market activitycould indicate a reversal of a downtrend or further confirmation of the firm's uptrend.

Overvalued Fairly Valued Undervalued

Estimated Fair Value Fair Value Range Investment Style Sector Industry $135.00 $108.00 - $162.00 LARGE-CAP CORE Consumer Staples Recession Resistant

PepsiCo PEP FAIRLY VALUED

109114119124129134139144149154

020,000,00040,000,00060,000,00080,000,000

100,000,000120,000,000140,000,000160,000,000180,000,000

5-week Moving Average 13-week Moving

AverageStock Price

119124129134139144149154159

Overbought Line

Oversold Line

5360

0102030405060708090

1.4

1.0Average, 0.9

0.00.20.40.60.81.01.21.41.6

- 10-week Moving Average



Attractive

Pro Forma Income Statement -------------------- Historical --------------------

In Millions of USD (except for per share items)Dec-18 Dec-20

Total Revenue 64,661 70,372

Cost of Goods Sold 28,785 31,797

Selling, General and Administrative Expenses 25,170 28,495

Other Operating Expenses 596 0

Operating Income 10,110 10,080

Unusual items 0 0

Operating Income, including unusual items 10,110 10,080

Interest Expense (1,525) (1,128)

Other Non-operating Income 604 117

Pre-tax Income 9,189 9,069

Income Taxes (3,370) 1,894

Income after tax 12,559 7,175

Minority Interest and Equity Income (44) (55)

Net Income, excluding extra items 12,515 7,120

Income Available to Common, excluding extra items 12,515 7,120

Diluted Earnings per Share, excluding extra items 8.78 5.11

Diluted Weighted Shares Outstanding 1,425.0 1,392.0

Source: Company Filings, Xignite, Valuentum Projections

Note: Pro forma data in discounted cash-flow valuation may reflect significant adjustments from GAAP accounting data, including cash (not effective) tax rates and other analytical adjustments on a backward-looking and forward-looking basis. No individual data, by itself, found in this report should be used to make any investment decision.

1,407.0 1,378.8 1,364.1


5.20 6.11 6.61

7,314 8,425 9,010

7,314 8,425 9,010

(39) (55) (55)

7,353 8,480 9,065

1,959 2,254 2,410

9,312 10,734 11,475

156 0 0

(1,135) (1,128) (1,128)

0 0 0

10,291 11,862 12,603

10,291 11,862 12,603

0 0 0

30,132 33,381 34,774

26,738 29,914 31,163

67,161 75,157 78,539



---------- Projected ----------




Attractive

Pro Forma Balance Sheet -------------------- Historical --------------------


AssetsTotal Cash (including marketable securities) 10,990 9,551Inventory 3,128 4,172Accounts Receivable 7,142 8,404Other Current Assets 633 874Total Current Assets 21,893 23,001

Gross Fixed Assets 40,164 46,340(Accumulated Depreciation) (22,575) (24,971)Net Property, Plant, and Equipment 17,589 21,369

Goodwill, Net 14,808 18,757Intangibles, Net 15,825 19,315Other Long-term Assets 7,533 10,476Total Assets 77,648 92,918

LiabilitiesAccounts Payable 7,213 19,592Other Current Liabilities 10,899 0Current Portion of Long-term Debt 4,026 3,780Total Current Liabilities 22,138 23,372

Long-term Debt 28,295 40,370Other Long-term Liabilities 12,697 15,722Total Liabilities 63,130 79,464

Preferred Stock 0 0

Shareholders' EquityCommon Stock and Additional Paid in Capital 3,976 3,933Retained Earnings 59,947 63,443Other Equity (49,405) (53,922)Total Shareholders' Equity 14,518 13,454

Total Liabilities and Shareholders' Equity 77,648 92,918




78,547 94,968 97,110

(51,069) (55,551) (57,139)14,786 14,666 16,341

3,909 3,933 3,93361,946 66,284 69,547

0 0 0

63,761 80,301 80,769

29,148 40,370 40,37014,152 15,722 15,722

20,461 24,209 24,677

0 426 7632,920 3,780 3,780

17,541 20,003 20,134

78,547 94,968 97,110

16,043 19,315 19,31510,053 10,476 10,476

19,305 23,177 25,011

15,501 18,757 18,757

43,003 51,004 55,901(23,698) (27,827) (30,890)

747 874 87417,645 23,243 23,551

3,338 4,320 4,4387,822 8,936 9,298

5,738 9,112 8,941

---------- Projected ----------


Estimated Fair Value Fair Value Range Investment Style Sector Industry $135.00 $108.00 - $162.00 LARGE-CAP CORE Consumer Staples Recession Resistant

PepsiCo PEP FAIRLY VALUED



Attractive

Pro Forma Cash Flow Statement -------------------- Historical --------------------


Cash from OperationsNet Income 12,559 7,175Depreciation and Amortization 2,399 2,548Deferred Income Taxes (531) 0Operating Gains Or Losses (1,206) 890Changes in Working Capital (3,806) 0

Cash Flow from Operations 9,415 10,613

Cash from InvestingPurchase of Property, Plant, Equipment (3,282) (4,240)Other Investing Cash Flows 7,846 (7,379)Cash Flow from Investing 4,564 (11,619)

Cash from FinancingIssuance (Retirement) of Stock (1,721) (1,821)Issuance (Retirement) of Debt (6,962) 11,293Dividends Paid (4,930) (5,509)Other Financing Cash Flows (156) (144)Cash Flow from Financing (13,769) 3,819

Foreign Exchange (98) (129)

Net Change in Cash 112 2,684




78 0 0

(5,199) (439) (171)

(8,489) (7,518) (7,891)

(5,304) (5,639) (5,802)(159) 0 0

(2,671) (1,879) (2,088)(355) 0 0

(6,437) (4,664) (4,897)

(4,232) (4,664) (4,897)(2,205) 0 0

9,649 11,743 12,617

(136) 250 5000 157 (12)

2,432 2,856 3,0630 0 0

7,353 8,480 9,065



---------- Projected ----------




Attractive

Recession ResistantRecession Resistant FAIRLY VALUED

Company Name TickerMarket Cap (USD-

mil) DCF Valuation ValueCreation™ ValueRisk™ ValueTrend™ Technicals Relative Strength

Anheuser-Busch InBev BUD 111,227 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BEARISH WEAK

Colgate-Palmolive CL 68,940 OVERVALUED EXCELLENT LOW NEGATIVE BULLISH WEAK

Clorox CLX 28,029 FAIRLY VALUED EXCELLENT LOW POSITIVE VERY BULLISH WEAK

Campbell Soup CPB 14,858 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE VERY BULLISH WEAK

Costco COST 166,893 OVERVALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Fresh Del Monte FDP 1,200 FAIRLY VALUED POOR LOW NEGATIVE VERY BULLISH WEAK

General Mills GIS 38,344 FAIRLY VALUED EXCELLENT LOW POSITIVE VERY BULLISH WEAK

Hormel Foods HRL 27,538 FAIRLY VALUED EXCELLENT LOW NEGATIVE VERY BULLISH WEAK

Kellogg K 23,060 OVERVALUED EXCELLENT LOW NEGATIVE VERY BULLISH WEAK

Keurig Dr Pepper KDP 41,686 FAIRLY VALUED EXCELLENT LOW NEGATIVE VERY BULLISH WEAK

Kraft Heinz KHC 39,358 FAIRLY VALUED POOR MEDIUM POSITIVE BEARISH WEAK

Kimberly-Clark KMB 53,485 OVERVALUED EXCELLENT LOW NEGATIVE VERY BULLISH WEAK

Coca-Cola KO 215,333 OVERVALUED EXCELLENT MEDIUM NEGATIVE BULLISH WEAK

Kroger KR 27,410 FAIRLY VALUED GOOD MEDIUM NEGATIVE BEARISH WEAK

Mondelez Intl MDLZ 85,023 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH WEAK

McCormick MKC 24,613 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE BEARISH WEAK

Altria Group MO 74,218 FAIRLY VALUED EXCELLENT LOW POSITIVE BEARISH WEAK

PepsiCo PEP 197,761 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH WEAK

Procter & Gamble PG 360,588 OVERVALUED EXCELLENT LOW POSITIVE BULLISH NEUTRAL

Philip Morris PM 123,282 FAIRLY VALUED EXCELLENT LOW NEGATIVE VERY BULLISH WEAK

Smucker SJM 13,570 FAIRLY VALUED GOOD LOW NEGATIVE BULLISH NEUTRAL

Molson Coors TAP 7,703 FAIRLY VALUED POOR LOW NEGATIVE BEARISH WEAK

Target TGT 85,087 FAIRLY VALUED EXCELLENT LOW NEGATIVE NEUTRAL STRONG

Tyson Foods TSN 22,150 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BEARISH WEAK

Wal-Mart WMT 414,483 OVERVALUED EXCELLENT LOW NEGATIVE BULLISH NEUTRAL

Church & Dwight CHD 22,016 FAIRLY VALUED EXCELLENT LOW POSITIVE BEARISH WEAK

Sysco SYY 37,883 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

Archer-Daniels-Midland ADM 28,007 FAIRLY VALUED GOOD MEDIUM NEGATIVE BULLISH NEUTRAL

Lancaster Colony LANC 4,717 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BEARISH WEAK

Casey's General CASY 6,518 FAIRLY VALUED GOOD MEDIUM NEGATIVE BEARISH WEAK

MID-CAP CORE UNATTRACTIVE

MID-CAP VALUE ATTRACTIVE


LARGE-CAP CORE UNATTRACTIVE

LARGE-CAP VALUE UNATTRACTIVE

LARGE-CAP VALUE ATTRACTIVE

LARGE-CAP CORE NEUTRAL

LARGE-CAP CORE ATTRACTIVE

MEGA-CAP CORE UNATTRACTIVE



MID-CAP VALUE ATTRACTIVE

LARGE-CAP VALUE UNATTRACTIVE


MEGA-CAP CORE NEUTRAL






MEGA-CAP CORE NEUTRAL





SMALL-CAP CORE ATTRACTIVE





The above bar chart reveals the price/fair value of the company, its peers, and the industry as a whole.Shaded blue denotes that the firm has earned the highest rating for that respective category.Investment Style Relative Valuation



We think the Recession Resistant industry is fairly valued at this time. The industry'smarket cap is trading between 80% and 120% of our estimate of its fair value based onour DCF process. Although we use a firm-specific ValueRisk™ measure to determinewhether a firm is undervalued or overvalued based on our DCF process, we consider anindustry to be undervalued if it is trading below 80% of our estimate of its fair valueand overvalued if it is trading at over 120% of our estimate of its fair value. We thinkthese fair value ranges are appropriate given the diversification benefits of holding abasket of stocks. Although there may be individual opportunities within the RecessionResistant industry, we don't find the industry as a whole attractive based solely onvaluation.


105.2%

129.1%

111.8%

0%

20%

40%

60%

80%

100%

120%

140%

PepsiCo Peer Median Recession Resistant

Valuentum's Full Page Stock Report


BA

G

I

N

C

J

D

M

H

E

L

K

A DCF ValuationShows whether the firm is undervalued, fairly valued, or overvalued based on our DCF process and by how much.

B Valuentum Buying Index (VBI)Provides insight into the timeliness of an investment opportunity. We rank firms from 1 to 10 based on rigorous fiancial, valuation, and technical analysis. A 10 represents one of our top picks.

C Valuentum Value Rating (VVR) Indicates whether we think a firm is undervalued, fairly valued, or overvalued on the basis of our DCF process.

D Investment ConsiderationsEvaluates firms on 12 different measures, from the firm's growth and cash flow generation to the stock's money flow index and upside/downside volume. We reveal technical support and resistance levels.

E 30-week Price and Volume ActionDisplays the last accumulation or distribution week of the stock and historical price and volume action.

G Company VitalsShows sector,industry and other relevant company information.

H Business QualitySummary of the firm's ability to create value for shareholders compared wth the underlying risk of its operations.

I Normalized EPS and EBITDAEstimation of the firm's normalized earnings measures and the corresponding valuation mutliples.

J Investment HighlightsOur opinion of the company, including analysis of its financial and technical strengths and weaknesses.

K Relative ValuationComparison of the firm's PE, PEG, and Price/FV ratios versus peers.

L Returns Summary3-year averages of the firm's key return measures, including return on invested capital, with and without goodwill.

M Leverage, Coverage, and LiquidityA snapshot of the company's financial health.

N Financial SummaryA summary of the proforma financial statements found in the extended report.

VBI Score Action10 Top Pick9 We'd Consider Buying

6 to 8 Constructive (add/trim)3 to 6 Less Exciting (add/trim)1 to 2 We'd Consider Selling

UNDERVALUED

FAIRLY VALUED

OVERVALUED

• Revenue Volatility • Margin Volatility • Earnings Volatility • Cash Flow Volatility

About Valuentum

@Valuentum, we strive to stand out from the crowd. Mostinvestment research publishers fall into a few camps,whether it be value, growth, income, momentum, chartistor some variant of the aforementioned. We think each inits own right holds merit, but we think the combination ofthese approaches can be even more powerful. After all,stock price movements aren’t just driven by investors ofthe value or growth variety, but by all market participants.Therefore, we look at stocks from a variety of investmentperspectives in order to better understand and identifyideas. We want to provide relevant information.

The core of our process is grounded in rigorous discountedcash flow analysis and incorporates the concept of amargin of safety. We offer a fair value estimate for eachcompany and provide a relative valuation assessment inthe context of a company’s industry and closest peers. Across section of our ValueCreation™ and ValueRisk™ratings provides a financial assessment of a company’sbusiness quality, while our ValueTrend™ rating offersinsight into the trajectory of a firm’s economic profitcreation. The Economic Castle rating measures themagnitude of future economic value generation, and theDividend Cushion ratio assesses the financial capacity of acompany to keep raising its dividend.

Our analysis doesn’t stop there. We also offer a technicalevaluation of the stock as well as other momentumindicators. We not only want to reveal to readers whichfirms may be undervalued, in our view, but we also wantto provide readers with information to help them assessentry and exit points. Most research publishers focus onarriving at a target price or fair value estimate, but mayfall short of providing a technical assessment to bolsterbuy and sell disciplines. We strive to go the distance andprovide readers with answers--not half the story.

An explanation of our approach would not be complete ifwe didn’t describe our ideal stock idea. We’re lookingfor companies that are undervalued--both on a DCF basisand versus peers--have strong growth potential, have asolid track record of creating economic profits forshareholders with reasonable risk, are strong cash flowgenerators, have manageable financial leverage, and arecurrently showing bullish technical and momentumindicators. For dividend growth ideas, we look forcompanies that have both the capacity and willingness tokeep raising the dividend.

Can such stock ideas exist? Subscribe to Valuentum toreceive our best investment ideas and analysis onhundreds of stocks, dividends, ETFs and more.

Historical firm-specific financial data generates our ValueCreation™, ValueRisk™, and ValueTrend™ ratings. The data provides the basis for our financial forecasts. Full annual forecasts of income statement, balance sheet, and cash flow statement items. Firm-specific cost of equity, cost of debt, weighted average cost of capital, and long-term growth and profitability measures estimated.

A complete three-stage free cash flow to the firm valuation model generates an estimate of the firm's equity value per share based on estimated future free cash flows.The volatility of key valuation drivers are estimated and a margin of safety is determined.

The firm's stock price is compared to the suggested margin of safety. If a firm's stock price falls below the lower bound of our estimated fair value range, it receives Valuentum's highest Value Rating.


Financial Forecasts

Financial Statement Analysis

Discounted Cash Flow Valuation

ModelValueRisk™

Rating

Valuentum Value Rating (VVR)

VBI Score Action10 Top Pick9 We'd Consider Buying

6 to 8 Constructive (add/trim)3 to 6 Less Exciting (add/trim)1 to 2 We'd Consider Selling

Methodology for Picking Stocks - Valuentum Buying Index™ (VBI)

@ Valuentum, we like to look at companies from anumber of different perspectives. The Valuentum BuyingIndex (VBI) combines rigorous financial and valuationanalysis with an evaluation of a stock's technicals to derivea rating between 1 and 10 for each company. The VBIplaces considerable emphasis on a company's discountedcash-flow (DCF) valuation, its relative valuation versuspeers (both forward PE and PEG ratios), and its technicalsin order to help readers assess entry and exit points on themost interesting ideas.

Let's follow the red line on the flow chart below to seehow a company can score a 10, the best mark on the index(a "Top Pick"). First, the company would need to be'undervalued' on a DCF basis and 'attractive' on a relativevalue basis. The stock would also have to be exhibiting

'bullish' technicals. The firm would need aValueCreation™ rating of 'good' or 'excellent', exhibit'high' or 'aggressive' growth prospects, and generate atleast a 'medium' or 'neutral' assessment for cash flowgeneration, financial leverage, and relative price strength.

This is a tall order for any company. Stocks that don'tmake the cut for a 10 are ranked accordingly, with theleast attractive stocks, in our opinion, garnering a ratingof 1 ("We'd sell"). Most of our coverage universeregisters ratings between 3 and 7, but at any given timethere could be large number of companies garneringeither very high or very low scores, especially at marketlows or tops, respectively.

The Best Ideas Newsletter portfolio puts the VBI intopractice.

The information contained in this report is not represented or warranted to be accurate, correct, complete, or timely. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

DCF FairlyValued

DCF Undervalued

Relative ValueUnattractive/Neutral

Relative Value Attractive

Relative ValueUnattractive/Neutral


Technicals Bearish: 1

Technicals Neutral: 2

TechnicalsBullish: 4

Technicals Bullish: 7

TechnicalsBearish: 6

Technicals >= BullishValueCreation(TM) >= GoodGrowth >= HighCash Flow Generation >= MediumFinancial Leverage <= MediumRelative Strength >= Neutral

Final Score: 10



TechnicalsBearish: 3

Relative Value Unattractive/Neutral











Initial Index Score

DCF Overvalued

ValueRisk™. This is a proprietary Valuentum measure. ValueRisk™ indicates thehistorical volatility of key valuation drivers, including revenue, gross margin, earningsbefore interest, and enterprise free cash flow. The standard deviation of each measure iscalculated and scaled against last year's measure to arrive at a percentage deviation foreach item. These percentage deviations are weighted equally to arrive at thecorresponding fair value range for each stock, measured in percentage terms. The firm'sperformance is measured along the scale of LOW, MEDIUM, HIGH, and VERY HIGH.The ValueRisk™ rating for each firm also determines the fundamental beta of eachfirm along the following scale: LOW (0.85), MEDIUM (1), HIGH (1.15), VERY HIGH(1.3).

Range of Potential Outcomes. The firm's margin of safety is shown in the graphicof a normal distribution. We consider a firm to be undervalued if its stock price fallsalong the green line and overvalued if the stock price falls along the red line. Weconsider the firm to be fairly valued if its stock price falls along the yellow line.

Return on Invested Capital. At Valuentum, we place considerable emphasis onreturn on invested capital (both with and without goodwill). The measure focuses onthe return (earnings) the company is generating on its operating assets and is superiorto return on equity and return on assets, which can be skewed by a firm's leverage orexcess cash balance, respectively. ValueTrend™. This is a proprietary Valuentum measure. ValueTrend™ indicates the

trajectory of the firm's return on invested capital (ROIC). Firms that earned an ROIClast year that was greater than the 3-year average of the measure earn a POSITIVErating. Firms that earned an ROIC last year that was less than the 3-year average of themeasure earn a NEGATIVE rating.

Technical Evaluation. We evaluate a firm's near-term and medium-term movingaverages and money flow index (MFI) to assign each firm a rating along thefollowing scale: VERY BULLISH, BULLISH, NEUTRAL, BEARISH, and VERYBEARISH.

Cash Flow Generation. Firms' cash flow generation capacity are measured along thescale of STRONG, MEDIUM, and WEAK. A firm with a 3-year historical free cashflow margin (free cash flow divided by sales) greater than 5% receives a STRONGrating, while firms earning less than 1% of sales as free cash flow receive a WEAKrating.

Stock Price Relative Strength. We assess the perfomance of the company's stockduring the past quarter, 13 weeks, relative to an ETF that mirrors the aggregateperformance of constituents of the stock market. Firms are measured along the scaleof STRONG, NEUTRAL, and WEAK. Companies that have outperformed themarket index by more than 2.5% during this 13-week period receive a STRONGrating, while firms that trailed the market index by more than 2.5% during this 13-week period receive a WEAK rating.

Financial Leverage. Based on the firm's normalized debt-to-EBITDA metric, we rank firms on the following scale: LOW, MEDIUM, and HIGH. Companies with a normalized debt-to-EBITDA ratio below 1.5 receive a LOW score, while those with a measure above 3 receive a HIGH score.

Money Flow Index (MFI). The MFI is a technical indicator that measures buyingand selling pressure based on both price and volume. Traders typically use thismeasure to identify potential reversals with overbought and oversold levels. We use a14-week measure to rank firms along the following scale: EXTREMELYOVERBOUGHT (>90), OVERBOUGHT (80-90), NEUTRAL (20-80), OVERSOLD(10-20), EXTREMELY OVERSOLD (0-10).

Upside/Downside Volume. Heavy volume on up days and lower volume on down days suggests that institutions are heavily participating in a stock's upward advance. We use the trailing 14-week average of upside and downside volume to calculate an informative ratio. We rank each firm's U/D volume ratio along the following scale: BULLISH, IMPROVING, DETERIORATING, and BEARISH.

GlossaryEstimated Fair Value. This measure is our opinion of the fair equity value per share ofthe company. If our forecasts prove accurate, which may not always be the case, wemay expect a firm's stock price to converge to this value within the next 3 years.

Investment Style. Valuentum uses its own proprietary stock-classification system.Nano-cap: Less than $50 million; Micro-cap: Between $50 million and $200 million;Small-cap: Between $200 million and $2 billion; Mid-cap: Between $2 billion and$10 billion; Large-cap: Between $10 billion and $200 billion; Mega-cap: Over $200billion. Blend: Firm's that we think are undervalued and exhibit high growthprospects (growth in excess of three times the rate of assumed inflation). Value:Firm's that we believe are undervalued, but do not exhibit high growth prospects.Growth: Firms that are not undervalued, in our opinion, but exhibit high growthprospects. Core: Firms that are neither undervalued nor exhibit high growthprospects.

Fair Value Range. The fair value range represents an upper bound and lower bound,between which we would consider the firm to be fairly valued. The range considers ourestimate of the firm's fair value and the margin of safety suggested by the volatility ofkey valuation drivers, including revenue, gross margin, earnings before interest, andenterprise free cash flow (the determinants behind our ValueRisk™ rating).

DCF Valuation. We opine on the firm's valuation based on our DCF process. Firmsthat are trading with an appropriate discount to our fair value estimate receive anUNDERVALUED rating. Firms that are trading within our fair value range receive aFAIRLY VALUED rating, while firms that are trading above the upper bound of ourfair value range receive an OVERVALUED rating.

Company Vitals. In this section, we list key financial information and the sector andindustry that Valuentum assigns to the stock. The P/E-Growth (5-yr), or PEG ratio,divides the current share price by last year's earnings (EPS) and then divides thatquotient by our estimate of the firm's 5-year EPS growth rate. The estimatednormalized diluted EPS and estimated normalized EBITDA represent the five-yearforward average of these measures used in our discounted cash flow model. The P/Eon estimated normalized EPS divides the current share price by estimated normalizeddiluted EPS. The EV/estimated normalized EBITDA considers the current enterprisevalue of the company and divides it by estimated normalized EBITDA. EV is definedas the firm's market capitalization plus total debt, minority interest, preferred stockless cash and cash equivalents.

Relative Value. We compare the firm's forward price-to earnings (PE) ratio and itsprice/earnings-to-growth (PEG) ratio to that of its peers. If both measures fall below thepeer median, the firm receives an ATTRACTIVE rating. If both are above the peermedian, the firm receives an UNATTRACTIVE rating. Any other combination resultsin a NEUTRAL rating.

ValueCreation™. This is a proprietary Valuentum measure. ValueCreation™indicates the firm's historical track record in creating economic value for shareholders,taking the average difference between ROIC (without goodwill) and the firm'sestimated WACC during the past three years. The firm's performance is measured alongthe scale of EXCELLENT, GOOD, POOR, and VERY POOR. Those firms withEXCELLENT ratings have a demonstrated track record of creating economic value,while those that register a VERY POOR mark have been destroying economic value.

Business Quality Matrix. We compare the firm's ValueCreation™ and ValueRisk™ratings. The box is an easy way for investors to quickly assess the business quality ofa company. Firms that generate economic profits with little operating variabilityscore near the top right of the matrix.

Timeliness Matrix. We compare the company's recent stock performance relative tothe market benchmark with our assessment of its valuation. Firms that areexperiencing near-term stock price outperformance and are undervalued by ourestimate may represent timely buys.

The information contained in this report is not represented or warranted to be accurate, correct, complete, or timely. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

PEP Rating History Price Fair Value VBI15-Apr-21 $142.07 $135.00 715-Oct-20 $141.65 $126.00 714-May-20 $133.05 $117.00 68-Nov-19 $133.13 $112.00 31-Apr-19 $121.47 $110.00 611-Jan-19 $108.16 $108.00 412-Nov-18 $118.35 $107.00 713-Jul-18 $112.69 $107.00 79-Mar-18 $112.54 $101.00 410-Nov-17 $112.75 $98.00 44-Aug-17 $116.37 $98.00 724-Mar-17 $112.12 $94.00 728-Nov-16 $100.60 $87.00 414-Nov-16 $101.31 $86.00 4

Affiliate RelationshipCustomers of Valuentum acknowledge and agree that Valuentum’s affiliate, Pigeon Oak Capital Management, LLC (“Advisor”), may act as an investment advisor to other clients and receive fees for such services. The advice given and the actions taken with respect to such clients and Advisor’s own account may differ from opinions or the timing and nature of action taken with respect to Valuentum’s ratings or published research. Customers of Valuentum must further recognize that transactions in a specific security are not completed for Valuentum customers’ accounts because Valuentum does not have the authority to make trades or provide personalized advice for newsletter clients. The Advisor has discretion to make trades in its clients’ accounts without receiving prior authorization in each instance. Valuentum’s customers also acknowledge that in managing the Advisors’ clients’ assets, Advisor may purchase or sell securities in which Valuentum has an opposite opinion on, and Advisor, its members, officers, directors, or employees, directly or indirectly, have or may acquire a position or interest that contradicts that of Valuentum’s opinion. Due to the fiduciary relationship between Advisor and its clients, Valuentum’s customers will not receive alerts of trades done by Advisor, and trades done by Valuentum’s customers based on opinions of Valuentum might lag trades done by Advisor’s clients. Advisor or its affiliated persons may obtain material, nonpublic or other confidential information that, if disclosed, might affect an investor’s decision to buy, sell or hold a security. Under applicable law, Advisor or Valuentum and their affiliated persons cannot improperly disclose or use this information for their personal benefit or for the benefit of any person, including clients of Advisor or customers of Valuentum. If Advisor or any affiliated person obtains nonpublic or other confidential information about any issuer, Valuentum will have no obligation to disclose the information to customers of it, clients of Advisor or use it for their benefit.

The High Yield Dividend Newsletter portfolio, the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Any performance, including that in the Nelson Exclusive publication, is hypothetical and does not represent actual trading. Past performance is not a guarantee of future results.

Valuentum is an investment research publishing company.

Valuentum has not owned and does not own any shares of stocks mentioned on its website or in this report. President of Investment Research Brian Nelson does not own any shares of stocks mentioned on Valuentum's website or in this report. Majority share owner of Valuentum, Elizabeth Nelson, currently has exposure to HON in her retirement account.

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PepsiCo PEP FAIRLY VALUED Buying Index™ 7 Value Rating

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