Diageo (LSE: DGE) shares seem to keep on rising. A 3% increase on 5 November put the drinks maker near the top of the FTSE 100 leaderboard. And it’s just one of many rip-roaring sessions that have seen the owner of Guinness and Johnnie Walker brands rise 38% since a low back in March.

With a share price still some distance from all-time highs, should investors buy now while the shares are undervalued? Or is this the kind of value trap that will cost folks a lot of money when it comes crashing back down to Earth? Here’s what I think.

What happened?

First thing to say, that 3% jump didn’t come out of nowhere. The FTSE 100 enjoyed a terrific day after the midterm elections in the US – up around 1.7%. Secondly, Diageo had a trading update which was warmly received by the markets.

What happened? The standout detail was that the decline in the US market was smaller than analysts had feared. A drop of 3.6% was some distance from the expected 6.7%. Strong performances from Guinness and Smirnoff ready-to-drink products boosted sales in the firm’s biggest market.

Otherwise, the news was lukewarm rather than raging hot. Net sales moved up, but only slightly. Guidance for the rest of 2027 remained intact. The update can be summed up by CEO Dave Lewis, who said the quarter was “a small step in the right direction.”

What’s the verdict then? Buy or Sell?

A Buy?

Before giving the answer, I must say it’s hard to have a Diageo, or any alcohol-adjacent stock, discussion without discussing the long term trend of the stuff. People are drinking less, getting healthier, opting for no alcohol options – especially younger folk. This trend’s one reason why the share price is still down 50% despite sales not being too affected (yet).

The ace up Diageo’s sleeve could be its low- or no-alcohol options – prime among them: Guinness 0.0. These alternatives are getting more and more popular and could offset a general decline in the rest of the firm’s products. Anecdotally, the zero-alcohol version of the famous Irish beer seems to be very popular when I’m out and about.

It should be noted that Diageo’s struggles are more complex than ‘Gen Z are drinking less’. For example, one problem is falling Tequila sales in the US. Why? Reports suggest that Hispanic groups are socialising less, partly because of inflation and less income, partly because of worries about immigration crackdowns.

I’ll note the forward price-to-earnings ratio of 13 looks attractive (and around half of its recent long-term average). Investing in a firm with real and consistent earnings might be appealing to those wanting to avoid the bloodbath that might be starting in AI and tech stocks at the moment too.

In spite of the risks, I think Diageo’s worth considering.

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

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John Fieldsend owns shares in Diageo.