Assessing Diageo (LSE:DGE) Valuation After Recent Share Price Rebound And Premium P/E Multiple

Simply Wall St

Mon, February 23, 2026 at 11:06 AM GMT+9 3 min read

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Context for Diageo’s Recent Share Performance

Diageo (LSE:DGE) has been back on investors’ radars after a period of mixed share performance, with recent returns over the past month and past 3 months drawing attention to how its current valuation lines up with fundamentals.

See our latest analysis for Diageo.

At a share price of £18.51, Diageo’s recent 1 month share price return of 9.2% and year to date share price return of 15.15% contrast with a 1 year total shareholder return of 11.86% decline, suggesting improving short term momentum after a tougher period for long term holders.

If Diageo’s recent move has you thinking about where else capital could work hard, this is a good moment to broaden your search with 4 top founder-led companies.

So with Diageo trading at £18.51, a reported intrinsic discount of around 33% and mixed long term returns, is the recent rebound a genuine buying opportunity, or is the market already pricing in future growth?

Most Popular Narrative: 10% Undervalued

Diageo’s most followed valuation narrative points to a fair value of £20.57 against a last close of £18.51, framing the recent rebound in the context of an implied discount.

Diageo is intensifying its focus on premiumization and category expansion (notably in tequila and ready-to-drink beverages) to capture rising consumer affluence and elevated brand preferences in both emerging and developed markets, supporting future revenue growth and gross margin expansion.

Read the complete narrative.

Curious what sits behind that price tag? The narrative leans on modest growth, firmer margins, and a future earnings multiple that assumes Diageo keeps justifying its brand power.

Using a 7.07% discount rate, this narrative brings those future cash flows and earnings expectations back to a present day fair value of £20.57, which is about 10% above the current £18.51 share price based on the data provided.

Result: Fair Value of £20.57 (UNDERVALUED)

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

However, that story can crack if alcohol moderation trends deepen, or if regulatory and tax pressures bite harder into volumes, pricing power and margins.

Find out about the key risks to this Diageo narrative.

Another Angle: What The P/E Is Telling You

The fair value narrative suggests Diageo looks about 10% undervalued at £20.57, but the current P/E of 23.6x paints a tighter picture. That is higher than both the European beverage peer average of 17.1x and the 17.3x peer group, even though the fair ratio sits at 25x.

Story continues  

In simple terms, the market already prices Diageo at a premium to its sector, yet still below the level our fair ratio suggests it could trade at if sentiment turns more supportive. For you, that gap can feel like either a valuation cushion or extra downside risk if expectations cool. Which side of that line do you sit on?

See what the numbers say about this price — find out in our valuation breakdown.

LSE:DGE P/E Ratio as at Feb 2026

Next Steps

All of this might sound balanced between promise and concern, so move quickly, review the data for yourself, and weigh 2 key rewards and 4 important warning signs before you decide where you stand.

Looking for more investment ideas?

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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._

Companies discussed in this article include DGE.L.

Have feedback on this article? Concerned about the content? Get in touch with us directly._ Alternatively, email [email protected]_

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