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Procter & Gamble

NYSE:PG
Snowflake Description

Established dividend payer with questionable track record.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
PG
NYSE
$225B
Market Cap
  1. 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 analysis.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 Avocados) 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?
  • Procter & Gamble is good value based on earnings compared to the US Household Products industry average.
  • Procter & Gamble is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does Procter & Gamble's expected growth come at a high price?
  • Procter & Gamble is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Procter & Gamble's assets?
  • Procter & Gamble is overvalued based on assets compared to the US 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 (8.3%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (2 Stage 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:
$43,053

Terminal Value

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

Terminal Value = $10,580 × (1 + 2.47%) ÷ (8.49% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$179,974

Present value of terminal value:
$119,724

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$162,777 = $43,053 + $119,724

Value = Total value / Shares Outstanding ($162,777 / 2,537)

Discount to Share Price

Value per share:
$64.16

Current discount (share price of $88.72): -38.27%



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 = 8.49% = 2.47% + (0.8 * 7.53%)



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). Note the market value of equity is used not the book value ($225,078,920,857).

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

0.652 = 0.589 (1 + (1- 30%) (15.2%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  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 (7.53%) (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 18 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!
Annual Growth Rate
7%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Procter & Gamble expected to grow at an attractive rate?
  • Procter & Gamble's earnings growth is expected to exceed the low risk savings rate of 3.6%.
Growth vs Market Checks
  • Procter & Gamble's earnings growth is positive but not above the US market average.
  • Procter & Gamble's revenue growth is positive but not above the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Procter & Gamble's earnings are expected to grow by 7% yearly, however this is not considered high growth (20% yearly).
  • Procter & Gamble's revenue is expected to grow by 3% yearly, however this is not considered high growth (20% yearly).
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 occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
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
  • Performance (ROE) is expected to be above the current US Household Products industry average.
  • An improvement in Procter & Gamble's performance (ROE) is expected over the next 3 years.
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Future performance checks
We assess Procter & Gamble's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. 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 2/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings 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 year on year growth rate is negative over the past 5 years and the most recent earnings are below average.
  • Procter & Gamble's 1 year earnings growth exceeds its 5 year annual average (1.2% vs -2.3%)
  • Procter & Gamble's earnings growth has not matched the US Household Products industry average in the past year (1.2% vs 5.9%).
Earnings and Revenue 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 < 20%) last year.
  • Procter & Gamble performed worse than the US Household Products industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has improved over 3 years.
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Past performance checks
We assess Procter & Gamble's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Household Products industry? (1 check)
  3. Is the recent earnings growth over the last year 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 2/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items 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's 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, assets are 0.8x debt.
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.
  • Procter & Gamble's level of debt (61.7% of total debt) compared to net worth is high (greater than 40%).
  • The level of debt compared to net worth has increased over the past 5 years (49.1% vs 61.7% today).
  • Total debt is well covered by annual operating cash flow (39%, greater than 20% of total debt).
  • Interest on debt is well covered by earnings (EBIT is 56.1x coverage).
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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 company 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
3.11%
Current annual income from Procter & Gamble dividends. Estimated to be 3.34% next year.
If you bought $2,000 of Procter & Gamble shares you are expected to receive $1 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 markets top dividend payers (3.18%).
Historical and Future Dividends
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 covered by net profit (1.4x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be covered by net profit (1.5x coverage).
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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
AGE 59
TENURE AS CEO 2 years
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
  • David's compensation has increased by more than 20% in the past year.
  • David's compensation appears reasonable.
Management Team Tenure

Average tenure and age of the Procter & Gamble management team in years:

3.7
Average Tenure
55.6
Average Age
  • The tenure for the Procter & Gamble management team is about average.
Management Team

David Taylor

TITLE
Chairman
COMPENSATION
$18M
AGE
59
TENURE
2 yrs

Jon Moeller

TITLE
CFO & Vice Chairman
COMPENSATION
$8M
AGE
53
TENURE
8.8 yrs

Gianni Ciserani

TITLE
Group President of Global Fabric & Home Care and Global Baby & Feminine Care
COMPENSATION
$8M
AGE
55
TENURE
2.1 yrs

Mary Ferguson-McHugh

TITLE
Group President of Global Family Care and Global Brand Creation & Innovation - P&G Ventures
COMPENSATION
$5M
AGE
57
TENURE
2.8 yrs

Steve, Steven Bishop

TITLE
Group President of Global Health Care
COMPENSATION
$5M
AGE
53
TENURE
2.8 yrs

Kathy Fish

TITLE
Chief Technology Officer
AGE
60
TENURE
3.8 yrs

Javier Polit

TITLE
Chief Information Officer
TENURE
0.6 yrs

Debbie Majoras

TITLE
Chief Legal Officer and Secretary
AGE
53
TENURE
7.8 yrs

Jeff Schomburger

TITLE
Global Sales Officer
AGE
55
TENURE
2.8 yrs

Laura Becker

TITLE
General Manager of Global Business Development
Board of Directors Tenure

Average tenure and age of the Procter & Gamble board of directors in years:

8
Average Tenure
63.7
Average Age
  • The tenure for the Procter & Gamble board of directors is about average.
Board of Directors

David Taylor

TITLE
Chairman
COMPENSATION
$18M
AGE
59
TENURE
1.3 yrs

Scott Cook

TITLE
Independent Director
COMPENSATION
$300K
AGE
65
TENURE
17.8 yrs

Jim McNerney

TITLE
Independent Lead Director
COMPENSATION
$335K
AGE
68
TENURE
2.4 yrs

Pat Woertz

TITLE
Independent Director
COMPENSATION
$310K
AGE
64
TENURE
9.8 yrs

Bray Braly

TITLE
Independent Director
COMPENSATION
$300K
AGE
56
TENURE
7.9 yrs

Ernesto de Leon

TITLE
Independent Director
COMPENSATION
$285K
AGE
65
TENURE
16.8 yrs

Meg Whitman

TITLE
Independent Director
COMPENSATION
$285K
AGE
61
TENURE
6.8 yrs

Ken Chenault

TITLE
Independent Director
COMPENSATION
$285K
AGE
66
TENURE
9.6 yrs

Terry Lundgren

TITLE
Independent Director
COMPENSATION
$285K
AGE
65
TENURE
4.8 yrs

Frank Blake

TITLE
Independent Director
COMPENSATION
$285K
AGE
68
TENURE
2.8 yrs
Recent Insider Trading
  • Procter & Gamble insiders have only sold shares 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 0/6, 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

Map
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: $225,078,920,857
Shares outstanding: 2,536,958,080
Website: http://www.pginvestor.com
Address: The Procter & Gamble Company
One Procter & Gamble Plaza,
Cincinnati,
Ohio, 45202,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NYSE PG Common Stock New York Stock Exchange US USD 02. Jan 1968
DB PRG Common Stock Deutsche Boerse AG DE EUR 02. Jan 1968
XTRA PRG Common Stock XETRA Trading Platform DE EUR 02. Jan 1968
LSE 0NOF Common Stock London Stock Exchange GB EUR 02. Jan 1968
SWX PG Common Stock SIX Swiss Exchange CH CHF 02. Jan 1968
ENXTPA PGP Common Stock Euronext Paris FR EUR 02. Jan 1968
WBAG PG Common Stock Wiener Boerse AG AT EUR 02. Jan 1968
SNSE PG Common Stock Santiago Stock Exchange CL USD 02. Jan 1968
BVC PG Common Stock Bolsa de Valores de Colombia CO COP 02. Jan 1968
BMV PG * Common Stock Bolsa Mexicana de Valores MX MXN 02. Jan 1968
BVL PG Common Stock Bolsa de Valores de Lima PE USD 02. Jan 1968
BOVESPA PGCO34 BDR EACH REPR 1 COM SH Bolsa de Valores de Sao Paulo BR BRL 03. May 2011
BASE PG CEDEAR EACH 5 REP 1 COM NPV Buenos Aires Stock Exchange AR ARS 07. Mar 2000
Number of employees
Current staff
Staff numbers
95,000
Procter & Gamble employees.
Industry
Industry: Household Products
Sector: Household and Personal Products