101 Diageo shares bought 12 months ago are now worth…

Diageo (LSE:DGE) shares have really kicked off 2026 in style. They’ve risen an impressive 12% in value, much to the relief of beleaguered investors like me. This recent strength has reduced losses over the last 12 months to 16%.

Someone who bought 101 shares in the FTSE 100 company a year ago would have seen the value of their investment drop from £2,173 to £1,823. Dividends of just under £86 would have helped take the edge off, however.

While Diageo still faces enormous challenges, I think we could be seeing the start of a heroic share price recovery. Want to know why?

Triple trouble

It’s important to first understand the causes of Diageo’s recent share price problems.

The slide started in mid-2023, a period when consumers really started to feel the pinch. The FTSE business suffered weak sales in key markets like the US, Latin America and parts of Asia, prompting the company to slash profit forecasts at times.

But that’s not all. The business owns some of the world’s most popular drinks labels like Captain Morgan, Smirnoff and Johnnie Walker. And in years gone by alcohol has proven one of the most resilient parts of the fast-moving consumer goods sector. This naturally raised concerns as to whether management was up to the job of running Diageo successfully.

Finally, confidence in the wider drinks sector’s been battered by the large-scale uptake of weight loss jabs. These drugs curb appetite for alcohol as well as food, adding to worries over changing consumer habits. Rising teetotalism already remains a big problem for these companies.

What could spark a rebound?

I’m expecting concerns over Ozempic and other slimming jabs to linger, though high prices, supply constraints and side effects could limit their adoption. Yet JP Morgan still believes this could be a $200bn market by 2030.

However, I’m more confident that Diageo can overcome the problem of non-GLP-1 users drinking less given its excellent record of product innovation. The runaway success of its Guinness 0.0 alcohol-free variant is one of the market’s biggest stories of late, and with Diageo’s enormous marketing and R&D budgets, it has the chance to turn disruption into opportunity.

Elsewhere, I’m expecting big things from new CEO Sir Dave Lewis on things like brand effectiveness and costs. This could soothe investor fears over the calibre of management and its ability to generate future growth. Plus I think revenues could spring higher as falling global interest rates support consumer spending and critical Asian markets exit their recent downturn.

Bottom line

Diageo’s share price still looks cheap to me, despite the strong start to 2026. At £18, the shares trade on a forward price-to-earnings (P/E) ratio of 15.3 times, which is some way below the 10-year average of 21.

I think this could continue attracting the attention of value investors, driving the FTSE company higher. While not without risk, I see Diageo shares as a bargain to consider today.