Diageo (LSE:DGE) — and more specifically, the Diageo share price — has inflicted plenty of pain on investors (myself included) in recent times. Throw in a thumping dividend cut and beleaguered long-term shareholders have been left licking their wounds.

Over five years, Diageo shares have slumped 51% in value. Yet while I’ve been left feeling miserable by the drinks giant’s performance, I’ve also remained optimistic it would ‘come good’ for me in the end.

Now something is stirring, and the FTSE 100 company is rising strongly again, up 11% just in the last week.

Whisper it: has the great Diageo share price rebound begun?

Sales struggles continue

Possibly. But it wouldn’t be because sales are finally on the up, after years of being battered by weak consumer spending and falling alcohol consumption more broadly.

Diageo’s latest results on Thursday (6 August) showed net sales down 2% in the 12 months to June. Both volumes and prices dropped as growth in Europe, Africa, and the Latin America and Caribbean division was “offset by weakness in North America and Asia Pacific.”

Despite that sustained sales weakness, Diageo managed to beat profit forecasts as cost cuts boosted margins. Operating margins rose 116 basis points to 28.9%. Operating profit rose 2%, to $5.7bn.

Why has Diageo’s share price risen?

Given current market conditions, that’s a decent result. But it’s not the numbers themselves that have got investors buzzing. No, it’s that investors are getting a taste of new CEO ‘Drastic’ Dave Lewis’s ambitious turnaround strategy. And they are thirsty for more.

Lewis took over the role on 1 January. Since then, he has:

• Targeted $1bn of cost savings over three years.
• Cut the dividend by 50%.
• Announced management changes (including recruiting Unilever‘s former UK boss Marc Woodward).
• Ordered headcount reductions of up to 30%.

Better product strategy

At the same time, Lewis has made no secret of revitalising Diageo’s long-underperforming drinks portfolio. For example, last week plans were announced to spend $1bn to double Guinness production by 2031, a brand that’s growing by double digits.

One particular quote from Diageo’s recent capital markets day caught my eye. According to Lewis:

We are going to broaden and be a little more active with our portfolio to allow us to serve more consumers on more occasions.

In truth, Diageo is planning to get “a lot more active” in squeezing greater growth from its star-packed drinks stable. This means leaning harder into fast-growing categories like ready-to-drink (RTD) products, while pushing more lower-priced and mid-tier drinks to complement its premium lines and attract cost-conscious shoppers.

Are Diageo shares a buy?

Under these plans, Diageo is targeting $8bn of cumulative free cash flow over the next three years. It’ll face challenges to reach this target, like weak consumer spending and intense competition. But helped by its multi-billion-dollar brands like Captain Morgan and Baileys, I’m hopeful this sleeping FTSE 100 giant may finally be waking up.

At today’s prices, I think Diageo shares are worth serious consideration for investors seeking recovery stocks. The firm’s forward price-to-earnings (P/E) ratio is just 14.9 times, miles below the 10-year average of 21-22.

Should you invest £5,000 in Diageo Plc right now?

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Royston Wild owns shares in Diageo.