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Procter & Gamble Company (The) (PG) Buy or Sell Stock Guide
Are you looking for the analysis of Procter & Gamble Company (The) (PG) stock? Are you wondering what the bulls and the bears say about it?
If so, you came to the right place. In this stock guide, we will share with you 10 reasons to buy and 8 reasons to sell PG stock. You’ll get a perspective on what the bulls and the bears say about it.
The analysis below may be also helpful to you if you have any of the following questions about PG stock:
- Is PG a buy or a sell?
- Should I sell or hold PG stock today?
- Is PG a good buy / investment?
- What are PG analyst opinions, recommendations and ratings?
Let’s start with the bull case. Here are the reasons to buy PG stock:
1. After shedding more than 100 brands, P&G appears committed to investing behind its brands to reignite top-line growth and foster its retail relationships to drive store traffic for its retail partners (which supports one facet of its intangible asset moat source).
2. We’re encouraged by recent efforts to clean up the core business and forgo unprofitable sales, such as its commodified bathroom tissue lineup in Mexico.
3. As evidence of its cost edge, P&G increased core earnings at 4 times the level of sales in emerging markets in fiscal 2014 but 8 times sales in fiscal 2015 and 2016.
4. In February 2012, Procter & Gamble announced a five-year (fiscal 2012 through fiscal 2016) productivity and cost savings plan to reduce spending across all areas (supply chain, research & development, marketing and overheads). The company’s original 5-year cost of goods savings target was $6 billion. It exceeded the target and delivered $7.2 billion in savings.
5. P&G is known for its impressive product development capabilities and marketing prowess. In order to sustain its brand appeal, the company focuses on innovation and expansion of its product portfolio, supported by strong marketing and commercialization. The company spends around $14 billion annually on marketing.
6. The company focuses on improving its product portfolio through strategic initiatives which enable it to concentrate on its fast-growing businesses. For example, in June 2012, the company divested its snacks unit, Pringles, to Kellogg Company to focus more on beauty and personal care products. In fiscal 2013, P&G divested its underperforming bleach business in Italy and Portugal and the Braun household appliances business.
7. Procter & Gamble generates strong free cash flow annually. The cash flow allows management the opportunity to invest in product innovations, acquisitions and brand development in addition to regularly paying dividends and repurchasing shares. The company has consistently increased its dividend.
8. PG quarterly revenue growth was 6.60%, higher than the industry and sector average revenue growth (1.55% and 2.27%, respectively). See PG revenue growth chart.
9. PG forward dividend yield is 2.40%, higher than the industry (0.47%) and sector (0.41%) forward dividend yields. See PG forward dividend chart.
10. PG average analyst rating is Buy. See PG analyst rating chart.
Now that you understand the bull case, let’s look at the reasons to sell PG stock (i.e., the bear case):
1. Despite the decline in oil prices, the firm and its peers are still contending with increased transportation costs as a result of truck driver shortages, which may constrain potential profit gains.
2. Foreign exchange movements can significantly weigh on P&G's bottom line, given that the firm makes and sells its fare in different locations.
3. P&G has called out that the competitive pressure resulting from local peers (as opposed to other globally branded players) in emerging markets has intensified, highlighting the importance of understanding each region on a detailed level.
4. The grooming segment also did not do well, with sales slumping 3% in fiscal 2017 and 3% in the first six months of fiscal 2018. Aggressive competitive activity, changes in grooming fashions and habits, and increased online competitors in some markets like the U.S. are hurting the performance. In fact, in the first six months of fiscal 2018, organic sales in the grooming segment declined 4%.
5. Despite modest economic recovery and improvement in consumer confidence in the United States, uncertainty persists. Though there has been moderate improvement in economic growth in the United States, consumers are increasing their spending only modestly, as a surge in job growth is yet to translate into significantly higher wages. High healthcare costs and still-tightened credit availability continue to hurt consumer discretionary spending in the United States.
6. PG profitability is declining. The YoY profit margin change was -9.37 percentage points. See PG profitability chart.
7. PG Price/Sales ratio is 4.49, and it’s high compared to its industry peers’ P/S ratios. See PG forward Price/Sales ratio chart.
8. PG short interest (days to cover the shorts) ratio is 3.36. The stock garners more short interest than the average industry, sector or S&P 500 stock. See PG short interest ratio chart.
Now let's look at the key statistics for PG:
|Average Price Target / Upside||$128.58 / 6.71%|
|Average Analyst Rating||Buy|
|Industry||Household & Personal Products|
|Number of Employees||92,000|
|Forward P/E Ratio||23.04|
|YoY Quarterly Revenue Growth||6.6%|
What are your thoughts on PG?
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