Procter & Gamble Company (PG)
- 60.37 (USD)
(+0.4 %)
9/8/2010 4:00:00 PM
PG Stock Report
NYSE:
PG
60.37
(USD)
(0.4 %
)
09/08 4:00 PM
Open
60.15
Day's Range
60.15
-
60.5
52Wk Range
39.37 - 64.58
Mkt Cap
169.7 Billion
Vol/Avg
7719891/10.7 Million
Div/Yield
3.01%
Key Fundamentals
| Price (9/8/2010) | 60.37 |
|---|---|
| Volume (9/8/2010) | 7719891 |
| Last Close Price | 60.37 |
| 10 Day Average Volume | 10.7 Million |
| 13 Week Price Range | 59.25 - 62.60 |
| 52 Week Price Range | 39.37 - 64.58 |
| LTM Revenue | 78.9 Billion |
| Shares Outstanding (6/30/2010) | 2.8 Billion |
| Market Capitalization | 169.7 Billion |
| Shares Held By Institutions | 96.5 Million |
| Institutional Holders | 2,206 |
| % Shares Held By Institutions | 60.19% |
| Earnings Per Share (EPS) | 4.32 |
| P/E Ratio | 16.9491 |
| Book Value Per Share | 21.081 |
| Gross Margin | 51.96% |
| Annual Dividend | 1.8018 |
| Dividend Yield | 3.01% |
| Beta | 0.54346 |
| Fiscal Year Ends | June |
About Procter & Gamble Company
Procter & Gamble Companyis considered to operate in the Consumer Goods sector. They specifically operate in the Personal Products business segment contained within the Household & Personal Products industry.
The Procter & Gamble Company was incorporated in Ohio in 1905, having been built from a business founded in 1837. The Company's business is focused on providing branded consumer packaged goods. The Company's goal is to provide products of superior quality and value to improve the lives of the world's consumers. The Company's organizational structure is comprised of three Global Business Units (GBUs), Global Operations, Global Business Services (GBS) and Corporate Functions (CF). The Company's has one of the largest and strongest portfolios of trusted brands, including Pampers, Tide, Ariel, Always, Pantene, Bounty, Pringles, Charmin, Downy, Iams, Crest, Actonel and Olay. It is a global market leader in the beauty category. It is the global market leader in hair care. In skin care, its primary brand is Olay, which is the top facial skin care retail brand in the world. The Company is also one of the global market leaders in prestige fragrances, mainly behind the Gucci, Hugo Boss and Dolce & Gabbana fragrance brands. Grooming: This segment consists of blades and razors, face and shave preparation products (such as shaving cream), electric hair removal devices and small household appliances. Health Care: it competes in oral care, feminine care, pharmaceuticals and personal health. In personal health, it is the market leader in nonprescription heartburn medications and in respiratory treatments with Prilosec OTC and Vicks, respectively. In snacks, it competes against both global and local competitors. In pet care, it competes in several markets around the globe in the premium pet care segment, with the Iams and Eukanuba brands. Fabric Care and Home Care: This segment is comprised of a variety of fabric care products, including laundry cleaning products and fabric conditioners; home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners; and batteries. Baby Care and Family Care: In baby care, it competes mainly in diapers, training pants and baby wipes. The Company is subject to various legal proceedings and claims arising out of its business which cover a wide range of matters such as governmental regulations, antitrust and trade regulations, product liability, patent and trademark matters, income taxes and other actions.
PG Stock Evaluation
We are upgrading PG at this time due to a better valuation. Since our last rating change that occurred on 05/15/2010, PG’s price has fallen by 2.51, or 4.01%. For a given set of fundamentals, a decrease in stock price makes a company’s valuation that much more attractive.
Recommendation Summary
We have upgraded PG as of this week’s report, while we firmly believe that valuing companies based on fundamentals is very useful, we are careful not to view historical valuations in a vacuum. It is foolish to believe that a stock will always revert to historical norms. So, although there is value in historical norms, they only tell part of the story. When the market or a sector breaks through strategic thresholds such as standard deviations of volatility or historical pricing multiples, we find it necessary to view history with a grain of salt as a new reality may be dawning.
This week's upgrade for PG is based on improving valuations, as Procter & Gamble Company's fundamentals have remained intact or even in some cases have improved. The market has not triggered any significant volatility alerts for the last year's returns, so we feel confident in comparing this stock to where it has stood historically. As you will read in the report, this stock is beginning to look more attractive based on this framework of comparing it to what the market has historically been willing to pay. Under normal circumstances, many stocks will tend to head back into the rationally expected price range, but more on that later.
The price of PG has dropped 2.66% since our last report.
PG's cash earnings estimates have declined by 5.05%, or 0.21 per share.
PG Revenue
Cash earnings is the most important factor in our analysis, but it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, PG the high and low end of the Price to Sales per share ratios are 2.67x and 1.98x respectively.
Notice that PG's current Price to Sales per share ratio is 2.16x, which is below its historical average only slightly. So, while not a huge positive for our analysis, we do feel it is worth noting that PG does look a bit undervalued on a Price to Sales basis, all other factors being equal. However, if the Price to Sales ratio drops further, Ockham Research is likely to become more bullish on this stock.
PG Cash Earnings
Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. PG is significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for PG to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 21.58 and a 15.84 low over the same period.
So with PG's current price (latest close of 60.03) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, PG is 17% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with PG.
PG Dividends
A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely.
When reviewing dividend yields for PG, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management's confidence in the company. PG’s estimated annual dividend is 1.80 resulting in a current dividend yield of 3.00%. The highest dividend yield from PG over recent history was 4.58% while the lowest dividend yield was 1.60%. PG is not making us feel all that confident when their current dividend yield is below the historical median by 2.88%.