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Procter & Gamble

NYSE:PG
Snowflake Description

Established dividend payer with acceptable track record.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
PG
NYSE
$240B
Market Cap
Household Products
Company description

The Procter & Gamble Company provides branded consumer packaged goods to consumers in the United States, Canada, Puerto Rico, Europe, the Asia Pacific, Greater China, Latin America, India, the Middle East, and Africa. More info.


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3 Month History
PG
Industry
5yr Volatility vs Market

Value

 Is Procter & Gamble undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Procter & Gamble to its discounted cash flow value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Procter & Gamble is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avacados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Procter & Gamble's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Procter & Gamble's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Overvalued based on earnings compared to the Household Products industry average.
  • Overvalued based on earnings compared to the overall market.
Price based on expected Growth
Does Procter & Gamble's expected growth come at a high price?
  • Poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Procter & Gamble's assets?
  • Good value based on assets compared to the Household Products industry average.
X
Value checks
We assess Procter & Gamble's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
  2. Is the PE ratio less than the market average, and/ or less than the Household Products industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Household Products industry average (and greater than 0)? (1 check)
  5. Procter & Gamble has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (7.98%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (Free cash flow to Equity)

The calculations below outline how an intrinsic value for Procter & Gamble is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$43,077

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $10,741 × (1 + 2.3%) ÷ (8.47% – 2.3%)

Terminal value based on the Perpetuity Method where growth (g) = 2.3%:
$179,129

Present value of terminal value:
$119,316

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value

Value = Total value / Shares Outstanding ($162,393 / 2,544)

Value per share:
$63.84

Current discount (share price of $94.4): -48%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.47% = 2.33% + (0.8 * 7.67%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.468 = 0.428 (1 + (1- 30%) (13.16%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 2.33% is from the 10 year government bond rate in US.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Procter & Gamble expected to perform in the next 1 to 3 years based on estimates from 19 analysts?

    The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

    Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
    3 year growth
    26%
    Expected earnings growth over 3 years.
    Future Earnings growth analysis
    Is Procter & Gamble expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.

    Are Procter & Gamble's annual earnings growth expected to exceed 3.4% over the next 3 years?

    • After 1 year
    • After 3 years
    1 & 3 year estimated growth in earnings
    Past and Future Earnings per Share
    The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
    Analysts growth expectations
    2 year growth check
    Super high growth metrics x1.5?

    Which of the these is expected to increase by over 50% in 2 year's time?

    • Revenue
    • Cash flow
    • Profit
    Performance in 3 years
    In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
    • Procter & Gamble is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

    Improvement & Relative to industry
    • Expected to be less than the Household Products industry average.
    • An improvement in Procter & Gamble's performance (ROE) is expected over the next 3 years.
    X
    Future performance checks
    We assess Procter & Gamble's future performance by looking at:
    1. Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
    2. Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
    3. Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
    4. Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
    5. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
    Some of the above checks will fail if the company is expected to be loss making in the relevant year.
    Procter & Gamble has a total score of 3/6, see the detailed checks below.

    Note: If no +3 year data is available, +2.5 year data may be used.

    Note 2: We use GAAP per Share in all our calculations.

    Full details on the Future part of the Simply Wall St company analysis model.

    Past Performance

     How has Procter & Gamble performed over the past 5 years?

    The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
    Past earnings growth
    Below we compare Procter & Gamble's growth in the last year to its industry (Household Products).
    Past Earnings growth analysis
    We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
    • Procter & Gamble's earnings growth has not matched the industry average in the past year.
    • Procter & Gamble's 1 year earnings growth exceeds its 5 year annual average (5.9% vs -1.6%).
    • Procter & Gamble has improved earnings in the past 5 years.
    Profit History
    Procter & Gamble's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
    Performance last year
    We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
    • Poor return on shareholders funds (ROE) last year.
    • Procter & Gamble performed worse than the Household Products industry average based on return on assets (ROA) last year.
    • Performance based on revenue producing assets (ROCE) is broadly the same over 3 years.
    X
    Past performance checks
    We assess Procter & Gamble's performance over the past 5 years by checking for:
    1. Has earnings per share (EPS) increased in past 5 years? (1 check)
    2. Has the EPS growth in the last year exceeded that of the Household Products industry? (1 check)
    3. Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
    4. Is the Return on Equity (ROE) higher than 20%? (1 check)
    5. Is the Return on Assets (ROA) above industry average? (1 check)
    6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
    The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
    Procter & Gamble has a total score of 3/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations.

    Full details on the Past part of the Simply Wall St company analysis model.

    Health

     How is Procter & Gamble's financial health and their level of debt?

    A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

    The boxes below represent the relative size of what makes up Procter & Gamble's finances.

    The net worth of a company is the difference between its assets and liabilities.
    Net Worth
    • Procter & Gamble short term (1 year) commitments are greater than its holdings of cash and other short term assets.
    • Procter & Gamble's long term commitments exceed its cash and other short term assets.
    Balance sheet
    This treemap shows a more detailed breakdown of Procter & Gamble's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
    Assets
    Liabilities and shares
    The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
    • High level of stock/ inventory/ unsold assets.
    • Total debt is not covered by total short term assets.
    Historical Debt
    Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

    The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

    If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
    • The level of debt (57%) compared to net worth is high (greater 40%).
    • The level of debt compared to net worth has increased over the past 5 years (47% vs 57% today).
    • Total debt is well covered by annual operating cash flow (greater than 20% of total debt).
    • Interest on debt is well covered by earnings (49.9x coverage).
    X
    Financial health checks
    We assess Procter & Gamble's financial health by checking for:
    1. Are short term assets greater than short term liabilities? (1 check)
    2. Are short term assets greater than long term liabilities? (1 check)
    3. Has the debt to equity ratio increased in the past 5 years? (1 check)
    4. Is the debt to equity ratio over 40%? (1 check)
    5. Is the debt covered by short term assets? (1 check)
    6. Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
    7. Procter & Gamble has a total score of 2/6, see the detailed checks below.


    Full details on the Health part of the Simply Wall St company analysis model.

    Dividends

     What is Procter & Gamble's current dividend yield, its reliability and sustainability?

    Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
    Annual Dividend Income
    Dividend payments
    2.95%
    Current annual income from Procter & Gamble dividends. Estimated to be 3.14% next year.
    If you bought $2,000 of Procter & Gamble shares you are expected to receive $59 in your first year as a dividend.
    Dividend Amount
    Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
    • Paying above low risk savings rate. (2.25%)
    • Paying below the markets top dividend payers. (3.18%)
    Historical dividend yield
    It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

    We also check to see if the dividend has increased in the past 10 years.
    • Dividends per share have been stable in the past 10 years.
    • Dividends per share have increased over the past 10 years.
    Current Payout to shareholders
    What portion of Procter & Gamble's earnings are paid to the shareholders as a dividend.
    • Dividends paid are well covered by net profit (2.1x coverage).
    Future Payout to shareholders
    • Dividends after 3 years are expected to be covered by net profit (1.5x coverage).
    X
    Income/ dividend checks
    We assess Procter & Gamble's dividend by checking for:
    1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
    2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
    3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
    4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
    5. How sustainable is the dividend, can Procter & Gamble afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
    6. Procter & Gamble has a total score of 5/6, see the detailed checks below.


    Full details on the Dividends part of the Simply Wall St company analysis model.

    Management

     What is the CEO of Procter & Gamble's salary, the management and board of directors tenure and is there insider trading?

    Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
    CEO
    David Taylor, image provided by Google.
    David Taylor
    COMPENSATION$18,096,177
    AGE59
    CEO Bio

    Mr. David S. Taylor has been the Chairman of the Board of The Procter & Gamble Company since July 1, 2016 and has been its Chief Executive Officer and President since November 1, 2015. Mr. Taylor served as Group President of Global Beauty, Grooming and Health Care at Procter & Gamble Co. until November 1, 2015. He served as Head of Over Health and Grooming at Procter & Gamble Co. since July 1, 2013. He served as the Group President of Global Home Care at The Procter & Gamble Company from 2007 to June 30, 2013 and served as its Group President of Global Health and Grooming since July 01, 2013 to July 2015. Mr. Taylor served as Group President of Global Home Care at Procter & Gamble Co. since 2007. He was responsible for P&G's Professional Business unit, which sells directly to large hotels, restaurants, airports, care homes, industrial facilities and retail chains. He served as vice-president - North America family care at The Procter & Gamble Company since 2003 until July 01, 2005. Mr. Taylor has been with P&G since 1980 in various roles. He served as President of Global Family Care of Procter & Gamble Co. from July 1, 2005 to 2007. He also served as Vice President of North America Family Care at Procter & Gamble Co. from 2003 to July 1, 2005. He has 25 years of experience, including more than five years outside the USA and assignments in Baby, Beauty and Family Care. His previous positions include: served as Production Manager at Greenville, NC since 1980; Department Manager at Greenville, NC since 1983; Operations Manager at Cheboygan, MI since 1985; Operations Manager at Albany, GA since 1986; Plant Manager at Mehoopany, PA since 1989; Assistant Brand Manager at Pampers, U.S. (Cincinnati) since 1992; Brand Manager at Pampers, U.S., (Cincinnati) since 1993; Marketing Director at Diaper Products, US, (Cincinnati) since 1996; General Manager of Hong Kong & China Hair Care, (Hong Kong/China) since 1998; General Manager at Greater China Hair Care and Tissues & Towel, (China) since 2000 and General Manager and Vice President of Greater China Hair Care & Anti-Counterfeiting (China) and Vice President-Western Europe Family Care since 2001. His Local And National Activities include: Since 2006, has been on Church of the Savior Methodist Church's Endowment Board. He served as an Independent Director of TRWAutomotive Holdings Corp. since November 17, 2010 until May 15, 2015. He serves as a Director at The Procter & Gamble Company. He has been Board of Directors at America's Second Harvest and since 2007, he has been Cincinnati Scholarship Foundation's Board of Trustees. From 1989 to 1991, he served as Board Member at Regional Development Commission - Mehoopany, PA; From 1992 to 1998 at Anderson Hills United Methodist Church; from 1998 to 2001 at Church of All Nations; From 1998 to 2001, Mr. Taylor served as Board Member at HKANA - Retail Association; From 2000 to 2001, he served as Vice Chairman at Quality Brand Protection Committee - China. He served as a Director of TRW Automotive Inc. Since 2006 until May 15, 2015. Mr. Taylor holds a BS in Electrical Engineering from Duke University in 1980.

    CEO Compensation
    • CEO's compensation has been consistent with company performance over the past year.
    • CEO's compensation appears reasonable.
    Management Team Tenure

    Average tenure of the Procter & Gamble management team:

    Management tenure
    3.6 years
    • The tenure for the Procter & Gamble management team is about average.
    Management Team

    David Taylor

    TITLE
    Chairman
    COMPENSATION
    $18,096,177
    AGE
    59

    Jon Moeller

    TITLE
    CFO & Vice Chairman
    COMPENSATION
    $8,028,801
    AGE
    53

    Gianni Ciserani

    TITLE
    Group President of Global Fabric & Home Care and Global Baby & Feminine Care
    COMPENSATION
    $7,614,418
    AGE
    55

    Mary Ferguson-McHugh

    TITLE
    Group President of Global Family Care and Global Brand Creation & Innovation - P&G Ventures
    COMPENSATION
    $5,432,919
    AGE
    57

    Steve, Steven Bishop

    TITLE
    Group President of Global Health Care
    COMPENSATION
    $5,151,195
    AGE
    53

    Kathy Fish

    TITLE
    Chief Technology Officer
    AGE
    60
    Board of Directors Tenure

    Average tenure of the Procter & Gamble board of directors:

    Board tenure
    11 years
    • The average tenure for the Procter & Gamble board of directors is over 10 years, this suggests they are a seasoned and experienced board.
    Board of Directors

    David Taylor

    TITLE
    Chairman
    COMPENSATION
    $18,096,177
    AGE
    59

    Scott Cook

    TITLE
    Independent Director
    COMPENSATION
    $300,000
    AGE
    65

    Jim McNerney

    TITLE
    Independent Lead Director
    COMPENSATION
    $335,000
    AGE
    68

    Pat Woertz

    TITLE
    Independent Director
    COMPENSATION
    $310,000
    AGE
    64

    Bray Braly

    TITLE
    Independent Director
    COMPENSATION
    $300,000
    AGE
    56

    Ernesto de Leon

    TITLE
    Independent Director
    COMPENSATION
    $285,000
    AGE
    65
    Recent Insider Trading
    • Procter & Gamble insiders have sold more shares than they have bought in the past 3 months.
    Who owns this company?
    X
    Management checks
    We assess Procter & Gamble's management by checking for:
    1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
    2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
    3. Is the average tenure of the management team less than 2 years? (1 check)
    4. Is the average tenure of the board of directors team less than 3 years? (1 check)
    5. Procter & Gamble has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.


    Note: We use the top 6 management executives and board members in our calculations.

    Note 2: Insider trading include any internal stakeholders and these transactions.

    Full details on the Management part of the Simply Wall St company analysis model.

    Company News

    Company Info

    Description

    The Procter & Gamble Company provides branded consumer packaged goods to consumers in the United States, Canada, Puerto Rico, Europe, the Asia Pacific, Greater China, Latin America, India, the Middle East, and Africa. The company’s Beauty segment offers hair care products, including conditioners, shampoos, styling aids, and treatments; and skin and personal care products, such as antiperspirant and deodorant, personal cleansing, and skin care products. It markets its products under Head & Shoulders, Pantene, Rejoice, Olay, Old Spice, Safeguard, and SK-II brands. The company’s Grooming segment provides shave care products comprising female and male blades and razors, pre- and post-shave products, and other shave care products; and appliances that include electric razors and epilators under the Braun, Fusion, Gillette, Mach3, Prestobarba, and Venus brands. Its Health Care segment offers toothbrushes, toothpastes, and other oral care products; and gastrointestinal, rapid diagnostics, respiratory, vitamin/mineral/supplement, and other personal health care products under the Crest, Oral-B, Prilosec, and Vicks brands. The company’s Fabric & Home Care segment provides fabric enhancers, laundry additives, and laundry detergents; and air care, dish care, P&G professional, and surface care products under the Ariel, Downy, Gain, Tide, Cascade, Dawn, Febreze, Mr. Clean, and Swiffer brands. Its Baby, Feminine & Family Care segment offers baby wipes, diapers, and pants; adult incontinence and feminine care products; and paper towels, tissues, and toilet paper under the Luvs, Pampers, Always, Tampax, Bounty, and Charmin brands. The company sells its products through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, distributors, baby stores, specialty beauty stores, e-commerce, high-frequency stores, and pharmacies. The Procter & Gamble Company was founded in 1837 and is based in Cincinnati, Ohio.

    Details
    Name:The Procter & Gamble Company
    Ticker:PG
    Exchange:NYSE
    Founded:1837
    Market Cap:$240,135 million
    Website:http://www.pginvestor.com
    Listings
    Map

    One Procter & Gamble Plaza, Cincinnati, 45202, United States

    Number of employees
    Street

    Current staff
    Staff numbers
    95,000
    Procter & Gamble employees.
    Industry
    Industry:Household Products
    Sector:Household and Personal Products