vitamins/minerals/supplements, and other personal health care products. This segment markets its products under the Always, Crest, Oral-B, and Vicks brand names. The Fabric Care and Home Care segment provides bleach and laundry additives, fabric enhancers, and laundry detergents; air care, dish care, and surface care products; batteries; pet care products; and professional products. This segment sells its products under the Ace, Ariel, Dawn, Downy, Duracell, Febreze, Gain, Iams, and Tide brand names. The Baby Care and Family Care segment offers baby wipes, diapers, pants, paper towels, tissues, and toilet papers under the Bounty, Charmin, and Pampers brand names. The company markets its products through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, high-frequency stores, and e-commerce in approximately 180 countries worldwide. The Procter & Gamble Company was founded in 1837 and is based in Cincinnati, Ohio.
Procter & Gamble currently pays a dividend of $0.602 per quarter for a $2.41 annual dividend. At the close of market on Monday, December 24th PG’s price per share was $81.31. This gives the stock a current dividend yield of 2.96%. Normally I look for a dividend yield of at least 3%, so I wouldn´t be satisfied with this dividend yield from PG. In 2003, Procter & Gamble paid an annual dividend amount of $0.93 per share. The dividend trend has been up each year as it now pays $2.41 annually per share. This gives PG a 10 year annual compound dividend growth rate of 10.08%. Procter & Gamble has increased its dividend for more than five decades. Procter & Gamble´s dividend growth rate has been good on last 3, 5 and 10 years, 8.28%, 9.55% and 10.80%. 1 year growth rate is fair 7.04%. Procter & Gamble normally pay dividend in February, May, August and November.
Procter & Gamble's EPS has grown an average of 7.89% over the past 10 years, 1.48% in the past five years. The past three years, EPS has grown 3.02%, and in the past year growth has been nice 23.72%. Procter & Gamble's EPS of development in last 5 and 3 years don´t seems to be very good. Analyst estimates for 5 years earnigs growth rate per annum are 8.33% (http://finance.yahoo.com/q/ae?s=PG+Analyst+Estimates) If that will happen, PG will be back on track to grow up it´s EPS.
Procter & Gamble's net income has increased by an average of 8.11% over the past 10 years, went down -1.30% in the past five years. In last three years net income went down -3.88% and last year grow up 5,17%. Net income trend looks similar to the EPS trend.
Procter & Gamble's revenue has increased 6.85% over the past 10 years, 0.16% in the last 5 years. In the last 3 years, profits have grown 2.16%, last year revenue grow up by 0.58%.
Procter & Gamble`s amount of shares has go down nicely, except on year 2005 those increased, but after that it has continue to go down. That I like, because less shares outstanding, my shares are giving me a larger portion of the earnings.
Procter & Gamble's dividend payout ratio has been in the past 10 years on average 48.25%. This means that Procter & Gamble will distribute about a half of the profits to shareholders, and put rest of the new investment, as well as increases the value of shares through share repurchases. It suits me very well.
Procter & Gamble's ROE has been around 23% over the past 10 years, which are okay for me.
Current ratio measures the company's ability to meet short-term obligations. Procter & Gamble has current ratio 0.80 at the end of 2012. This means that the funds will be able to cover 80% of current liability obligations. I usually like the current ratio is greater than 1, so Procter & Gamble don´t look good in this case.
This number tells me how many years it will take to pay off the current long term debt of the company by using all net profit into it. I want this ratio to be less than 5, because the company is able to pay for all long-term debt from less than five years and on my opinion then company don´t have too much debt. Procter & Gamble`s long term debt has been clearly under 5 times net profit on last 10 years, In the last 10-year average is 2.08, last year it was 1.69.
To found out share fair value I mainly use six different methods. (http://www.passive-income-pursuit.com/search/label/stock%20valuation%20method).
Procter & Gamble`s current P/E are 20.66, which are over to it`s historical 5 years average high (17.26) but lower as 10 years average high (23.59). By calculating using estimated EPS 4.29 for year 2014 and the average 5-year low P/E ratio (12.87) shares fair value will be $55.22. Using the 10-year average low P/E ratio (17.10), fair value will be $73.35. Calculating with 5 year average P/E ratio (15.07), fair value will be $64.63, with 10 year average P/E ratio (20.34) fair value will be $87.27.
Procter & Gamble`s current annual dividend are $2.41. At the close of market on Monday, December 24th PG’s price per share was $81.31. This gives the stock a current dividend yield of 2.96%. Average 5 years high dividend yields has been 3.95% and average 10 years high dividend yields has been 3.00%. Those dividend yields gives share fair value $61.03 for 5 and $80.26 for 10 years. Calculating with 5 year average yield 3.32%, fair value will be $72.50, with 10 year average yield 2.53%, fair value will be $95.18.
Procter & Gamble`s current P/S ratio are 2.79 with revenue estimates for year 2014 (85.98B). Average 5 years low P/S ratio are 1.88 and average 10 years low P/S ratio are 2.33. By calculating using estimated revenue for year 2014 and the average 5 years low P/S ratio fair value will be $55.08. Using the 10 years average low P/S ratio, fair value will be $68.51. Calculating with 5 year average P/S ratio (2.20), fair value will be $64.73, with 10 year average P/S ratio (2.78) fair value will be $81.50.
Analyst estimates for 5 years earnings growth rate per annum are 8.33%. I will use on my calculation 66% of that, which are 5.5%. Then I assume that continue growth after 5 years will be 3%. I use discount rate 10% and EPS $3.94. Total I calculate for next 30 years. That will give me share fair value $55.94.
|NPV of Future EPS||$69.51||$62.15||$55.94||$50.67||$46.17|
Procter & Gamble`s current annual dividend are $2.41. I assume that Procter & Gamble will be able to grow dividends for the next 5 years at the lowest of the 1, 3, 5, or 10 year growth rates or 15%. In this case that would be 7.04%. Then I assume that after 5 years grow rate will be 5%. To calculate the value I used a discount rate of 10%. Total I calculate again for next 30 years. That will give me share fair value $72.70.
|NPV of Future Dividends||$98.83||$84.42||$72.70||$63.11||$55.20|
Procter & Gamble has EPS 3.94 (ttm). When I calculate Procter & Gamble`s future price with analyst estimate for 5 years EPS growth (8.33)% and using low P/E ratio last 5 years, I came for price $75.69. That would give about 8% downside for PG´s current price.
Procter & Gamble are a great company with 57 years continuing dividend increase and I would like to have some shares of it in my portfolio. Based on my analysis, I think Procter & Gamble are currently a bit overvalued, and I am not prepared at this time to invest in it. If the price would fall under $75, then I might be interested on it.
Disclosure: I do not own any shares of PG.