Procter & Gamble (PG): Exploring Valuation After Recent Share Price Softness

Procter & Gamble (PG) stock has ticked lower recently, with investors weighing its trajectory after a stretch of share price softness. With the stock slipping around 3% over the past month, many are curious about what is next.

See our latest analysis for Procter & Gamble.

After a period of steady gains, Procter & Gamble’s share price momentum has cooled, with the stock marking a year-to-date share price return of -10.82%. While recent months have brought a modest pullback, the company’s three-year total shareholder return of 16.97% still speaks to its longer-term resilience.

If this shift in momentum has you rethinking your strategy, now is the perfect opportunity to broaden your view and discover fast growing stocks with high insider ownership

With shares trading about 20% below their estimated intrinsic value and analysts still assigning a price target well above current levels, investors must ask if this is a genuine bargain or if future growth is already reflected in the price.

Most Popular Narrative: 23.5% Overvalued

The narrative from andre_santos points to a significant gap between Procter & Gamble’s fair value estimate of $119.81 and its last close price of $148.02, suggesting the shares are trading at a noticeable premium and raising questions about what assumptions drive this stance.

“To assess P&G’s intrinsic value, four valuation methods are used, with different weightings to reflect relevance and reliability: Discounted Cash Flow (DCF), Dividend Discount Model (DDM), Historical Dividend Yield, and Historical P/E Ratio. Given that both Historical methods assume a mean reversion, that may not occur, DCF and DDM valuation methods will be more heavily weighted. Assuming a continuous emphasis on the payment of dividends and the slowing of the company revenues/growth over the following years, it justifies putting more weight onto the historical dividend mean reversion and less into the historical PE reversion, because a transition into higher PE ratios is not expected if growth slows.”

Read the complete narrative.

Curious what’s driving this conservative view on P&G’s value? Only by unpacking the unique blend of growth forecasts, margin assumptions, and dividend dynamics will the full story behind this fair value emerge. Dive in to see which metric tips the scales.

Result: Fair Value of $119.81 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, stronger-than-expected margin improvements or a surprise acceleration in revenue growth could quickly challenge the current overvaluation narrative and shift sentiment upward.

Find out about the key risks to this Procter & Gamble narrative.

Another View: Discounted Cash Flow Model

Taking a different angle, our DCF model suggests Procter & Gamble’s intrinsic value is closer to $186.25, which is over 20% higher than its current share price. This stands in sharp contrast to the prior narrative and raises the question: what if the market is missing something?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Procter & Gamble for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 842 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Procter & Gamble Narrative

If you think there is more beneath the surface or want to put your own assumptions to the test, why not create your own perspective in just a few minutes and Do it your way

A great starting point for your Procter & Gamble research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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