1 to buy a FTSE 100 stock… but not now.

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of FTSE 100 It has some amazing companies that I would love to own in my investment portfolio. But paying too much for stocks is a real risk — especially in a market like this.

That’s why I stay away Diageo (LSE:DGE) currently shares. I think the core business is very attractive, but his share is too expensive for me now.

The business

Diageo’s biggest asset is its brand portfolio. Warren Buffett talks about ‘mindshare’ as a measure of brand strength.

I think the Diageo brands are clearly impressed by this measure. They include the original Scotch whiskey (Johnny WalkerLeader Vodka (Smirnoff) and the leading gene (Gordon) in sales volume.

There is also a tangible benefit to having powerful brands. They enable the business to maintain higher operating margins and hedge against inflation.

Over the past decade, the company has consistently maintained operating margins above 25%. is similar to Coke And double around PepsiCo.

Strong brands enable the company to use its assets efficiently. Diageo generates revenues of £4.4bn using just under £6bn in fixed assets.

That’s about a 75% return on fixed assets between Coca-Cola (116%) and Pepsi (46%). So I think the Diageo brands are comparable to the best.

return on investment

There is no question in my mind that Diageo is a good business, I would like to own a part of it. But I don’t think now is the time to buy the stock.

Right now, inflation and the prospect of a recession are weighing on investors. That makes them pile up into stable, predictable companies.

Over the past 12 months, Diageo’s share price has risen, while others have fallen. As a result, I find other stocks more attractive at the moment.

Diageo has about £16.5bn of debt and £2.5bn of cash. It generates free cash flow of just under £3bn a year.

At a market value of £88bn, this is a return of 2.78%. The risk of that, to me, is that the company isn’t growing fast enough.

Over the past decade, Diageo’s revenue has grown at around 4%. If this continues, the average annual return over the next 10 years will be around 3.3%.

This doesn’t seem surprising to me. Right now I’d rather put my money elsewhere.

ProfessionalFor example, the current free cash flow rate is 4.21%. Moreover, the credit rating company is growing its revenue rapidly.

Similarly, DiplomaFree cash yield is 3.94%, but growing at around 10%. I expect an annual return of around 5% from the underlying business there.

A stock to buy?

It is clear to me that Diageo has excellent brands that make it an attractive investment proposition. It’s a stock I’d really like to own.

But now I think the price is too expensive. As I am currently more bullish on other UK stocks, I do not see myself adding Diageo shares to my portfolio for the time being.

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