Company: Procter & Gamble Co Ticker: PG Current Price: $ 77.

86 Industry: Household Products

Target Price: $90.00 (10%) TTM P/E: 21.47 Beta: 0.62 Market Cap: $202.4b
Stop Loss: $67.78(15%) Forward P/E: 17.59 Credit Rating: A++ (VL) Avg. Vol 9.33 mil
52 Week High/ Low: $77.90/ $94.67 EPS: $3.83 Rating Outlook: Stable Dividend Yield: 3.37%
Value line price range est. for 2020-22: L-$95 Safety: 1 Indicative Yield: 3.13%
H-$115 Timeliness:2 Predictability of earnings: High 100 (VL)

Company Background:
“The Procter & Gamble Company makes branded consumer packaged goods, which are marketed and sold in more than 180 countries around the world. Has five reportable
segments: Beauty/Hair/Personal care (18% of fiscal 2017 sales); Grooming (10%); Health Care (12%); Fabric Care & Home Care (32%); Baby, Feminine & Family Care (28%).
International sales accounted for 55% of fiscal 2017 sales and Wal-Mart Stores accounted for 16%. Div. battery business in 2/16. Has 95,000 employees. Off. & dir. own less than
1% of common stock; BlackRock, 5.8%; Vanguard, 6.6% (8/17 proxy). Chairman/President/CEO: David S. Taylor. Inc “Value Line
Industry Outlook:
“The Household Products Industry has continued to face some ups and downs over the past few months. Indeed, the consumer goods manufacturers have faced headwinds
from elevated operating costs, rising raw material expenses, and unfavorable currency effects. Nevertheless, these companies' ongoing efforts (including restructuring
campaigns), and strategic growth moves, should help negate these pressures and better position the industry for the near and long hauls. Operating Pressures The household
products makers have faced rising input costs over the past couple of years. The rebounding energy market has led to increased raw materials expenses and higher distribution
costs. Several companies here have turned to streamlining efforts (discussed below) to offset higher operating costs. Others have tried passing along the increased expense to
consumers with incremental price hikes across their product lines.” Value Line
Investment Thesis:
“Over the summer, activist investor Nelson Peltz of Trian Fund Management sought a seat on the board of directors. He led the charge that the consumer goods maker was not
doing enough to boost sagging sales or support shareholder value. P&G encouraged its stockholders to vote against Mr. Peltz's board appointment at the October meeting, and
originally claimed that the company won the proxy fight. The following month, however, it announced that the hedge fund manager won by a small margin. The company is
reviewing the preliminary results of the vote. These shares offer limited long-term capital appreciation potential. The stock is ranked to outperform the broader market
averages for relative price performance in the year ahead. And PG appears to be well valued at this juncture. Even though the aforementioned proxy fight may add some
turbulence in the near term, this blue chip still holds plenty of conservative appeal. Plus, the equity offers attractive risk-adjusted income. Orly Seidman. ”Value line
Investment Risks:
“Restructuring Campaigns Internal improvements have become a key priority for several herein. Many have launched wide scale restructuring efforts, and cost-reduction
measures, which should counter aforementioned headwinds in the near term, and better position their businesses for the long haul. Some have relied on the integration of
acquisitions to jump start reorganization campaigns. Even though several manufacturers moved some of their operation to lower-cost areas overseas, some may consider
returning their production to our shores, as the current Presidential Administration may create more favorable business policies. Likewise, a few have been consolidating some
of their manufacturing facilities or implementing other streamlining efforts to improve margins. Too, others have been realigning their portfolios, shedding less-profitable entities.
Overall, there has been a recent push to improve productivity and operating efficiencies. Supply-chain improvements and stronger distribution networks should also aid the
companies' profitability moving forward. Market Expansion Meanwhile, the members herein have long histories of acquisitions. And we would not be surprised if several of these
conglomerates sought tuck-in additions or mergers to expand their businesses. Indeed, acquisitions often lead to significant cost and revenue synergies. And we figure the
acquirers will also look for assets which will help complement their holdings, or will diversify their rosters, helping them move into new product lines or categories.” Value line
Most recent quarter financial highlights (Jul - Dec 2017):
“Indeed, share earnings advanced 6%, while revenues inched up 1% during the September period, The company should continue to rebound nicely. The top line has been pretty
stagnant over the past couple of years, owing to unfavorable currency effects and the impact of recent divestitures. Even though we expect management's efforts (discussed
below) will add some wind to its sails, P&G make out only a 2% revenue advance for the full year. Core earnings, on the other hand, should benefit further from ongoing
business improvements, and we believe will climb another 5%-10% in fiscal 2018. Restructuring efforts and strategic improvements have begun to take hold. Productivity
enhancements, including the redesign of its supply chain, and cost controls have helped widen margins. These moves should offset rising input expenses. The company will
probably try to capture additional market share, and invest in innovation and product development, and widen its e-commerce business to
support revenue growth.”. Value Line

Financial Performance: Discounted Cash Flow

In Millions of USD 2012 2013 2014 2015 2016 2017 2018 Est 2012-16 2017-21
Revenue 82,006 80,116 74,401 70,749 65,299 65,058 66,534 Avg Revenue growth -3.6% 2.1%
Operating Profit 13,037 13,874 13,910 11,049 13,441 13,955 14,050 Avg EBITDA Margin 22% 24%
Net Income 10,756 11,312 11,643 7,036 10,508 15,326 10,228 Avg Net Income Margin 16% 18%
Revenue Growth % 1.1% -2.3% -7.1% -4.9% -7.7% -0.4% 2.27% Avg Debt/Equity 9.5% 10%
EBITDA% 23% 22% 23% 20% 26% 25% 26% Avg FCF / Margin 14%
Operating Profit % 16% 17% 19% 16% 21% 22% 23% Cost of Debt 3.43%
Net Income Margin 13% 14% 16% 10% 16% 24% 25% Tax Rate 23%
D/E 9.56% 9.91% 9.16% 9.47% 9.02% 9.56% 9.45% Cost of Equity 6.00%
EPS 3.66 3.86 4.01 2.44 3.69 5.59 5.4 WACC 5.75%
PE Ratio 13 17 17 29 28 22 21 Perpetuity growth rate 3%
Current Ratio 80% 94% 100% 110% 88% 80% 80% Analyst Opinion
ROE 16% 17% 17% 10% 17% 27% 23% Buy:9 Hold: 12 Sell:1
ROA 8% 8% 8% 5% 8% 12% 9% Target Price Range $95
Dividend Per share 2.14 2.29 2.45 2.59 2.66 2.7 2.7
FCF Per Share 3.11 3.66 3.31 3.96 4.19 3.5 3.6
Source: Ally Invest

Relative Valuation Total Return

 PG Colgate-CL KMB clorox Industry Avg.* PG SPDR S&P 500
P/E 19.93 27.45 18.27 24.1 24.44 YTD -11.1% 17.44% 17.44%
P/B 3.79 2017 6.56% 16.14% 16.14%
3.52 2.92 22.19 8.68
Last 3 Years -4.87% 30.57% 30.57%
Dividend Yield(12mo) 3.45%
2.02% 2.48% 2.55% 2.4% Last 5 Years 3.89% 73.40% 73.40%
CSR Characteristics
Revn Grth -.37% 0.77% 5.8% 3.68% 3.23% PG Industry
NI Grth 45.85% -7.15% -18.61% 8.18% 5.17% Governance Disclosure Score 62.5 57.14
Operating Margin 22.06% 23% 18% 19.25% 18.07% ESG Disclosure: 44.21 36.78
Debt / Equity 56.64% 11% 16% 404.98% 107.05% Social Disclosure Score 22.81 28.07
Market Cap 201.33B 62.22 B 39.65 B Environmental Disclosure Score 45.74 39.92
16.87 B 12.34B
Data: Bloomberg
Revenue 65.06B 15.454 B 18.259 B 5.97 B 5.72B
Net Income TTM 10.8B 2.040 B 2.202 B 798M 742.4 M
FCF TTM 10.19B 20.911 B 3.889 B 171M 636.5M