Today we're going to take a closer look at large-cap Consumer Discretionary company Procter & Gamble Company, whose shares are currently trading at $150.38. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Procter & Gamble Company's Valuation Is in Line With Its Sector Averages:
The Procter & Gamble Company provides branded consumer packaged goods worldwide. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Procter & Gamble Company has a trailing 12 month P/E ratio of 24.4 and a P/B ratio of 7.56.
Procter & Gamble Company's PEG ratio is 3.32, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Business Runs With Low Leverage Levels:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $66,832 | $67,684 | $70,950 | $76,118 | $80,187 | $82,006 |
| Gross Margins | 49% | 49% | 50% | 51% | 47% | 48% |
| Operating Margins | 20.0% | 8.0% | 22.0% | 24.0% | 22.0% | 22.0% |
| Net Margins | 15.0% | 6.0% | 18.0% | 19.0% | 18.0% | 18.0% |
| Net Income (MM) | $9,861 | $3,966 | $13,103 | $14,352 | $14,793 | $14,738 |
| Net Interest Expense (MM) | $506 | $871 | $465 | $502 | $570 | $756 |
| Depreciation & Amort. (MM) | $2,834 | $2,824 | $3,013 | $2,735 | $2,807 | $2,714 |
| Earnings Per Share | $3.67 | $1.43 | $4.96 | $5.5 | $5.81 | $5.9 |
| Diluted Shares (MM) | 2,657 | 2,540 | 2,626 | 2,601 | 2,539 | 2,484 |
| Free Cash Flow (MM) | $11,150 | $11,895 | $14,330 | $15,584 | $13,567 | $13,786 |
| Capital Expenditures (MM) | $3,717 | $3,347 | $3,073 | $2,787 | $3,156 | $3,062 |
| Net Current Assets (MM) | -$44,813 | -$46,898 | -$46,917 | -$50,978 | -$51,124 | -$49,577 |
| Long Term Debt (MM) | $21,514 | $18,985 | $22,514 | $22,322 | $20,582 | $24,069 |
| Net Debt / EBITDA | 1.85 | 2.27 | 0.72 | 0.83 | 0.84 | 0.7 |
Procter & Gamble Company has low leverage, growing revenues and decreasing reinvestment in the business, and positive EPS growth. However, the firm has slimmer gross margins than its peers. Finally, we note that Procter & Gamble Company has average net margins with a stable trend and irregular cash flows.
