Key takeaways
View moreProcter & Gamble appears moderately overvalued based on its high Enterprise Value to Sales ratio (5.29) compared to the industry average (2.59), and its current P/E ratio (26.33) exceeding both its historical average and industry average. While the company boasts strong profitability metrics and brand strength, its low projected organic sales growth (2%) and significant risks from consumer volatility and tariff impacts suggest that the current valuation may be overly optimistic.
- Procter & Gamble exhibits strong profitability, with Return on Assets (12.78%), Return on Equity (30.29%), and Return on Invested Capital (23.23%) significantly exceeding industry averages as of March 31, 2025.
- The company faces liquidity challenges, as indicated by a Current Ratio of 0.71 and a Quick Ratio of 0.50, both substantially below industry averages, raising concerns about meeting short-term obligations.
- Revenue has been declining, with the most recent quarter's sales at $19.78 billion, down from $21.88 billion in the previous quarter, signaling potential headwinds in top-line growth.
- The Enterprise Value to Sales ratio of 5.29 is significantly higher than the industry average of 2.59, suggesting potential overvaluation relative to sales.
- Management anticipates a volatile and challenging environment, with tariffs expected to impact earnings by $100 to $160 million in the fourth quarter, necessitating strategic mitigation efforts.
- Compared to the Consumer Staples Select Sector SPDR Fund (XLP), PG has underperformed over the past year, with returns of 4.17% versus 9.44% for XLP, indicating weaker relative performance.
- The company is committed to returning cash to shareholders, with plans to pay around $10 billion in dividends and repurchase $6 to $7 billion in common stock.
- Consumer volatility, particularly in the US and Europe, is a key concern, impacting the company's performance and requiring close monitoring of consumer behavior.
- The company's negative working capital of -$9.81 billion as of March 31, 2025, indicates potential short-term liquidity challenges that need to be addressed.
Evaluation summary
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Company Overview:
- Procter & Gamble Co. (PG) is a global provider of branded consumer packaged goods, operating in segments like Beauty, Grooming, Health Care, Fabric and Home Care, and Baby, Feminine and Family Care.
- The company's key products include hair, skin, and personal care items in the Beauty segment; shave care products in the Grooming segment; oral care and personal health care products in the Health Care segment; laundry detergents and air/dish/surface care products in the Fabric and Home Care segment; and baby wipes, diapers, feminine care products, and paper towels in the Baby, Feminine and Family Care segment.
- For comparative analysis, the Consumer Staples Select Sector SPDR Fund (XLP) is used as a benchmark, and The Clorox Co. (CLX) and Colgate-Palmolive Co. (CL) are used as industry peers.
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Financial Performance:
- Procter & Gamble's financial performance shows a recent decrease in revenue. The sales/revenue for the quarter ending March 31, 2025, was $19.78 billion, down from $21.88 billion in the previous quarter (December 31, 2024).
- Net income also decreased from $4.66 billion in the December 2024 quarter to $3.77 billion in the March 2025 quarter.
- The gross profit margin was 51.10% for the quarter ending March 31, 2025, compared to 52.52% in the previous quarter. The net profit margin decreased from 21.16% to 19.06% over the same period.
- Return on Average Assets was 12.78%, Return on Average Total Equity was 30.29%, and Return on Average Total Capital was 23.23% for the quarter ending March 31, 2025. These are significantly higher than the industry averages of -1.08%, 295.94%, and 7.31%, respectively, indicating strong profitability.
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Operational Efficiency:
- The balance sheet analysis reveals that the company's working capital is negative, with a working capital of -$9.81 billion as of March 31, 2025. This indicates potential short-term liquidity challenges.
- Net operating cash flow decreased from $4.83 billion in the December 2024 quarter to $3.71 billion in the March 2025 quarter.
- Free cash flow to equity also decreased from $3.90 billion to $2.85 billion over the same period.
- Capital expenditure was $859 million for the quarter ending March 31, 2025. Depreciation, depletion, and amortization were $690 million.
- The company paid $2.43 billion in cash dividends during the March 2025 quarter and repurchased shares worth $735 million, returning a total of $3.17 billion to shareholders.
- The current ratio is 0.71, and the quick ratio is 0.50, both significantly below the industry averages of 2.37 and 1.76, respectively, indicating liquidity concerns.
- The total debt to total equity ratio is 65.31%, lower than the industry average of 616.95%, suggesting a conservative capital structure.
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Growth Opportunities:
- The earnings call highlighted that the company is focused on innovation across all price tiers to drive category growth.
- Management is prioritizing long-term growth and value creation over short-term gains, emphasizing the importance of maintaining investment in the business.
- The company is actively managing its portfolio across markets and brands to strengthen its ability to generate US dollar-based returns in daily-use categories.
- Key initiatives include innovation across categories, including Crest 3D White Deep Stain Remover, Oral-B iO2, Tide OxyBoost Power Pods, Gain Odor Defense detergent, and Tide Evo.
- The company expects organic sales growth of approximately 2% for fiscal year 2025.
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Recent Developments and Market Sentiment:
- The earnings call on April 24, 2025, revealed that consumer volatility, particularly in the US and Europe, is a key concern.
- Tariffs are expected to have a significant impact, estimated at $1 to $1.5 billion, necessitating strategic mitigation efforts.
- Analysts are focused on consumer behavior, fiscal year 2026 modeling, innovation and investment, trade-down risks, brand sentiment, category growth rates, and international market growth.
- Management expects a volatile and challenging environment, including input costs, currencies, consumer behavior, competitor actions, retailer dynamics, geopolitical factors, and tariff impacts.
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Risks and Threats:
- The company faces risks related to consumer volatility, tariff impacts, and macroeconomic uncertainties.
- SEC filings highlight exposure to foreign exchange fluctuations, commodity price fluctuations, and changing government policies.
- The earnings call mentioned that enterprise markets are experiencing slower growth due to economic and political instability in certain regions.
- The company's 10-K filing mentions legal proceedings and claims arising out of the business, including antitrust, product liability, advertising, environmental, and tax matters.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio is 19.70, and the Enterprise Value to Sales ratio is 5.29 as of March 31, 2025.
- The Enterprise Value to Sales ratio is significantly higher than the industry average of 2.59, suggesting that the company may be overvalued relative to its sales.
- Potential catalysts include successful innovation rollouts and effective mitigation of tariff impacts.
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Price Performance:
- The stock price has fluctuated between $157.41 and $171.32 from March 27, 2025, to May 23, 2025.
- The price dropped significantly on April 4, 2025, from $171.32 to $162.74 and again on April 24, 2025, from $165.73 to $159.53, following the earnings call.
- Compared to the Consumer Staples Select Sector SPDR Fund (XLP), PG has underperformed over the past year, with returns of 4.17% versus 9.44% for XLP.
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Future Outlook:
- Management expects organic sales growth of approximately 2% and core EPS growth in the range of 2% to 4% for fiscal year 2025.
- The company plans to pay around $10 billion in dividends and repurchase $6 to $7 billion in common stock, returning $16 to $17 billion of cash to shareholders.
- The outlook includes an estimated $100 to $160 million impact from tariffs in the fourth quarter.
- Recent news and developments, such as consumer volatility and tariff impacts, are expected to influence the company's future performance negatively.
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Summary:
- Procter & Gamble is a leading consumer goods company with strong profitability but faces challenges in revenue growth and liquidity.
- Strengths: High profitability metrics (ROA, ROE, ROIC), conservative capital structure (lower debt-to-equity ratio).
- Weaknesses: Decreasing revenue, weak liquidity position (low current and quick ratios), negative working capital.
- Opportunities: Innovation across all price tiers, portfolio management, productivity acceleration.
- Threats: Consumer volatility, tariff impacts, macroeconomic uncertainties, competitive pressures.
- The company's financial health is stable, but its liquidity position requires monitoring.
- Critical factors for future performance include successful innovation, effective tariff mitigation, and improved working capital management.
- Areas requiring further monitoring include consumer behavior, tariff impacts, and competitive pressures.
- Overall, PG presents a mixed investment profile. Its strong profitability and conservative capital structure are positives, but its revenue growth and liquidity challenges, coupled with external risks, warrant caution.
Price history
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Fundamentals
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Insights
- Procter & Gamble maintains strong profitability and a conservative capital structure, but faces challenges in revenue growth and liquidity.
- The company's liquidity position is weak, with a Current Ratio and Quick Ratio significantly below the industry average, raising concerns about its ability to meet short-term obligations.
- Management's focus on innovation, portfolio management, and productivity acceleration is essential in navigating the challenging operating environment and sustaining long-term growth.
- The company faces various risk factors, including consumer volatility, tariff impacts, and macroeconomic uncertainties, which could negatively impact its financial performance.
- The recent decrease in net income and EBIT raises concerns about the sustainability of the company's profitability levels and requires proactive mitigation efforts.
Analysis
- Revenue
- Revenue has been decreasing recently, with the most recent quarter's sales significantly below the 8-quarter average.
- The trailing twelve-month YoY growth rate is lower than both the 3-year and 5-year CAGRs, indicating a deceleration in revenue growth.
- The company's Enterprise Value to Sales ratio is significantly higher than the industry average, suggesting that the company may be overvalued relative to its sales.
- Profitability
- Despite decreasing revenue, the company maintains strong profitability metrics, with Return on Average Assets, Return on Average Total Capital, and Return on Average Invested Capital all significantly higher than industry averages.
- The Net Profit Margin is also significantly higher than the industry average, indicating efficient cost management and strong pricing power.
- However, the recent decrease in net income and EBIT raises concerns about the sustainability of these profitability levels.
- Liquidity
- The company's liquidity position is weak, with a Current Ratio and Quick Ratio significantly below the industry average.
- This suggests potential challenges in meeting short-term obligations and may require management to focus on improving working capital management.
- The earnings call highlighted consumer volatility as a key concern, which could further impact the company's liquidity position.
- Solvency
- The company maintains a conservative capital structure, with a Total Debt to Total Equity Ratio significantly lower than the industry average.
- The Debt/EBITDA ratio is also relatively low, indicating manageable debt levels.
- This provides the company with financial flexibility to navigate economic downturns and invest in future growth opportunities.
- Operational Efficiency
- The company's Gross Profit Margin is higher than the industry average, indicating efficient cost management and strong pricing power.
- However, the recent decrease in revenue and COGS suggests a potential slowdown in sales or changes in product mix that may impact operational efficiency.
- Management's focus on productivity acceleration, as highlighted in the earnings call, is critical in maintaining operational efficiency and mitigating cost pressures.
- Cash Flow Analysis - Net operating cash flow has decreased, primarily due to a decrease in net income and changes in working capital. - The company's free cash flow margin has also decreased, indicating a decline in cash flow generation relative to sales. - This raises concerns about the company's ability to fund future investments and shareholder returns.
- Risk Factors
- The company faces various risk factors, including consumer volatility, tariff impacts, and macroeconomic uncertainties.
- The SEC filings highlight the company's exposure to foreign exchange fluctuations, commodity price fluctuations, and changing government policies.
- These risk factors could negatively impact the company's financial performance and require proactive mitigation efforts.
- Future Outlook
- The company's future outlook is uncertain, with management expecting a volatile and challenging environment.
- The company's ability to drive revenue growth, improve profitability margins, and manage operating expenses effectively will be critical in achieving its financial goals.
- Management's focus on innovation, portfolio management, and productivity acceleration is essential in navigating the challenging operating environment and sustaining long-term growth.
- Profitability
Financial statements
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Public filings
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- Procter & Gamble is a global consumer goods leader with a diversified portfolio of well-known brands across key categories like Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care.
- The company operates in a highly competitive environment and faces various macroeconomic, geopolitical, and regulatory risks that can impact its financial performance, including foreign exchange volatility, commodity price fluctuations, and changing government policies.
- P&G has demonstrated the ability to drive organic sales growth, improve profitability through productivity initiatives, and generate strong cash flow, though it remains exposed to operational, financial, and legal/compliance risks.
- The company's recent limited market portfolio restructuring and non-cash impairment charge on the Gillette brand highlight the need to proactively manage its brand portfolio and adapt to evolving market conditions.
- Overall, P&G appears to be a well-run consumer goods leader, but it must continue navigating a challenging operating environment and mitigating various risks to sustain its growth and profitability.
Core Business and Operations:
- Procter & Gamble Co. (P&G) is a global leader in the fast-moving consumer goods industry, focused on providing branded consumer packaged goods of superior quality and value
- Key product categories include Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care
- Products are sold in about 180 countries and territories, primarily through mass merchandisers, e-commerce channels, grocery stores, and other retail outlets
- Major customers include Walmart Inc. and its affiliates, which account for approximately 16% of consolidated net sales
- Operates in a highly competitive environment against global, regional, and local competitors, including other branded products and retailers' private-label brands
Industry and Market Trends:
- Exposed to global macroeconomic factors, geopolitical tensions, and government policies that can negatively impact net sales, net earnings, and cash flows
- Significant exposure to foreign exchange fluctuations, both due to translation and transaction exposures
- Costs subject to fluctuations in commodity and input material prices, transportation costs, inflation, and productivity efforts
- Impacted by changes in U.S. and foreign government legislative, regulatory, or enforcement policies, including tax policy changes and trade agreements
Recent Events:
- Announced a limited market portfolio restructuring in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions
- Recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) on the Gillette indefinite-lived intangible asset due to a higher discount rate, currency devaluation, and the impact of the restructuring program
Risk Factors:
- Ability to successfully manage global financial risks, including foreign currency fluctuations and pricing controls
- Exposure to local, regional, or global economic volatility and ability to generate sufficient cash flow
- Uncertainties related to changing political and geopolitical conditions, including exchange rate fluctuations and trade controls
- Disruptions in credit markets, banking relationships, or changes to credit rating
- Maintaining key manufacturing and supply arrangements and managing business disruptions
- Successfully managing cost fluctuations and pressures, including commodity and raw material prices
- Ability to compete with local and global competitors in new and existing sales channels
- Managing and maintaining key customer relationships
- Protecting reputation and brand equity by managing real or perceived issues
- Reliance on and maintenance of key information and operational technology systems
- Successfully managing ongoing organizational changes and retaining key employees
Legal Matters:
- Subject to certain legal proceedings and claims arising out of the business, including antitrust, product liability, advertising, environmental, and tax matters
- Contingencies pursuant to environmental laws and regulations that may require corrective actions
Management's Discussion and Analysis:
- Net sales increased 2% in fiscal 2024, driven by higher pricing partially offset by unfavorable foreign exchange
- Organic sales growth of 4%, with increases across most reportable segments
- Gross margin increased 350 basis points, driven by productivity savings and higher pricing
- SG&A increased 10% due to higher marketing and overhead costs
- Operating margin was unchanged at 22.1% as the increase in gross margin was offset by higher SG&A
- Net earnings increased 2% to $15.0 billion, with diluted EPS up 2% to $6.02
- Adjusted free cash flow of $16.9 billion, with adjusted free cash flow productivity of 105%
Earnings calls
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Earnings Report 2025Q3 (2025-04-24)
Key takeaways
- Consumer Volatility is a Key Concern: The company's performance is significantly affected by consumer behavior, particularly in the US and Europe, making it a critical area to monitor.
- Tariffs Pose a Significant Headwind: The estimated $1 to $1.5 billion impact from tariffs necessitates strategic mitigation efforts, including productivity improvements, sourcing changes, and pricing adjustments.
- Innovation Remains a Priority: Despite economic uncertainty, the company is committed to investing in innovation across all price tiers to drive category growth and maintain its competitive edge.
- Enterprise Markets Face Challenges: While historically a strong growth driver, enterprise markets are experiencing slower growth due to various factors, including economic and political instability in certain regions.
- Supply Chain Proximity is an Advantage: The company's strategy of locating production close to consumption provides a competitive advantage in terms of supply chain stability and cost efficiency.
- Focus on Long-Term Strategy: Management is prioritizing long-term growth and value creation over short-term gains, emphasizing the importance of maintaining investment in the business.
Focus of management’s prepared remarks
- Integrated Growth Strategy: Delivering superiority across the portfolio, actively managing brands and markets, accelerating productivity, constructively disrupting the industry, and empowering agile organizations.
- Innovation Pipeline: Strong innovation plans across categories, including Crest 3D White Deep Stain Remover, Oral-B iO2, Tide OxyBoost Power Pods, Gain Odor Defense detergent, and Tide Evo.
- Portfolio Management: Actively managing the portfolio across markets and brands to strengthen the ability to generate US dollar-based returns in daily-use categories.
- Productivity Acceleration: Continuing to accelerate productivity in all areas of operation to fuel investments in superiority, mitigate cost and currency headwinds, and drive margin expansion.
- Constructive Disruption: Continuing efforts to constructively disrupt themselves and the industry by changing, adapting, and creating new ideas, technologies, and capabilities.
- Fiscal Year 2025 Outlook: Expecting a volatile and challenging environment with organic sales growth of approximately 2% and core EPS growth in the range of 2% to 4%.
- Capital Allocation: Plans to pay around $10 billion in dividends and repurchase $6 to $7 billion in common stock, returning $16 to $17 billion of cash to shareholders.
- Tariff Impacts: Anticipating a range of $100 to $160 million in BT tariff impacts in the fourth quarter, primarily from raw and packaging materials and finished products sourced from China.
Focus of the analyst Q&A
- Consumer Behavior:
- Current consumer behavior in the US and Europe, including the impact of economic uncertainty and volatility.
- Plans to support revenue growth and market share in light of potentially worsening market growth.
- Fiscal Year 2026 Modeling:
- Factors to consider when modeling and forecasting for fiscal year 2026.
- Category growth rates and incremental levers to offset tariffs or subdued demand.
- Innovation and Investment:
- Level of investment behind innovation and demand building in the updated outlook.
- Changes in the nature of investment, such as advertising versus trade promotion.
- Trade Down Risks:
- Positioning of the company if consumer trade down increases.
- Geographies or product categories where private label shares have increased.
- Brand Sentiment:
- Signs of anti-American brand sentiment around the world, particularly in China.
- Risks to the Olay and Air Care businesses in China.
- Category Growth Rates:
- The glide path back to historical category growth rates.
- Adjustments to the playbook in light of slowing category development in North America and Europe.
- International Market Growth:
- Category growth and market share performance in Europe and Latin America.
- Consumption trends in Latin America.
- Q4 Acceleration:
- Confidence in the implied acceleration in Q4 versus Q3, given softer consumption trends.
- Channel Shifting:
- Acceleration in consumer shifting to club and mass channels.
- Changes in the company's approach to selling into those channels.
- Tariff Impact:
- Clarification on the $1 billion to $1.5 billion tariff impact.
- Pricing plans to mitigate the tariff impact, particularly in categories with high private label exposure.
- China Pricing:
- Logic behind taking pricing in skincare in China, given the tough market.
- Retailer Perspectives:
- How major retailers are thinking about changes in trade policy and their suppliers' supply chains.
- Retailers' private label strategies.
- Enterprise Market Growth:
- Key growth drivers and industry growth rates in enterprise markets.
- Expectations for growth rates in enterprise markets in fiscal year 2026.
- Innovation Rollouts:
- Impact of macro factors and tariffs on the pace of innovation rollouts.
- Commodity Inflation:
- Whether the $200 million commodity inflation guidance includes the tariff impact.
- Potential for crude oil benefits to reduce the cost of tariffs in fiscal year 2026.
- Supply Chain Agility:
- Agility of the supply chain to shift things around and mitigate tariff impacts.
- Conversations with suppliers and retail partners on absorbing tariff costs.
Summary
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Financial Performance
Procter & Gamble's third-quarter results were impacted by consumer and retail volatility, particularly in the US and Europe. Organic sales grew 1%, driven by pricing. EPS was $1.54, up 1% on a currency-neutral basis, with core EPS increasing 3%. Core gross margin decreased by 30 basis points, while core operating margin increased by 90 basis points. Adjusted free cash flow productivity was 75%. The company returned $3.8 billion to shareholders through dividends and share repurchases. Fiscal year 2025 core EPS guidance was revised to $6.72 to $6.82, representing growth of 2% to 4%.
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Revenue Drivers
Organic sales growth was primarily driven by pricing, with volume and mix in line with the prior year. Personal health care and skin & personal care showed strong growth. North America's organic sales growth slowed due to lower consumer offtake and trade inventory reductions. China's organic sales declined, although SK-II in Greater China grew double digits. Latin America led enterprise markets with 6% growth. Global aggregate value share was down modestly.
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Profit Margins and Cost Management
Core gross margin was down 30 basis points, while core operating margin increased 90 basis points. Currency-neutral core operating margin increased 100 basis points. Productivity improvements contributed 280 basis points. The company expects a commodity cost headwind of approximately $200 million after tax and a similar headwind from foreign exchange rates for fiscal year 2025. The company is focused on driving productivity to mitigate cost headwinds and fuel investments in superiority.
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Guidance and Outlook
The company expects organic sales growth of approximately 2% for fiscal year 2025. Core EPS is projected to be $6.72 to $6.82 per share, representing growth of 2% to 4%. Adjusted free cash flow productivity is forecasted at 90%. The company plans to return $16 to $17 billion of cash to shareholders through dividends and share repurchases. The outlook includes an estimated $100 to $160 million impact from tariffs in the fourth quarter. The company anticipates a volatile and challenging environment, including input costs, currencies, consumer behavior, competitor actions, retailer dynamics, geopolitical factors, and tariff impacts.
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Strategic Initiatives
The company is focused on delivering superiority across its portfolio, actively managing its portfolio across markets and brands, accelerating productivity, and constructively disrupting itself and the industry. Key initiatives include innovation across all price tiers in fabric care, grooming, feminine care, and home care. The company is maintaining its innovation plans and investing to drive consumer interest and demand.
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Management Commentary
Management emphasized the importance of investing in the long-term health of brands, innovation, and demand creation despite near-term volatility. They expressed confidence in the company's integrated growth strategy and its ability to drive market growth and deliver balanced growth and value creation. They highlighted the company's commitment to returning cash to shareholders. Management acknowledged the challenging and volatile environment but remained focused on excellent execution of the company's strategy.
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Industry and Market Conditions
The company noted lower consumer offtake across categories in North America and Europe due to various factors, including market volatility, economic uncertainty, and geopolitical tensions. They observed channel shifting towards online, big box retailers, and club channels. The company expects markets to return to 3% to 4% growth but acknowledges the difficulty in predicting when this will occur.
Comparative analysis
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Benchmarks (as of 2025-05-23)
Consumer Staples Select Sector SPDR Fund (XLP)
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Performance Comparison:
- Procter & Gamble Co. (PG) has shown mixed performance compared to the Consumer Staples Select Sector SPDR Fund (XLP). Over the past year, PG has underperformed XLP, with returns of 4.17% versus 9.44% for XLP. However, over longer periods such as 2 and 3 years, PG has slightly outperformed XLP. For example, over 3 years, PG returned 22.11% compared to XLP's 19.26%. More recently, PG has underperformed, with a year-to-date return of 1.16% compared to XLP's 4.67%.
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Risk and Return Analysis:
- The annualized returns show that PG has provided lower returns than XLP over the past year (4.17% vs. 9.44%). However, over 2 and 3 years, PG has offered slightly higher annualized returns.
- In terms of annualized volatility, PG has generally exhibited higher volatility than XLP. For instance, in Q2 2025, PG's volatility ranged from 18.13% to 28.95%, while XLP's ranged from 15.3% to 24.71%. This indicates that PG's price movements are more variable than those of XLP.
- The maximum drawdown for PG was -23.77% on 10/10/2022, which is larger than XLP's maximum drawdown of -16.3% on 10/07/2022. This suggests that PG carries a higher risk profile, with the potential for more significant declines from previous peaks.
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Risk-Adjusted Performance:
- The Sharpe Ratio, which measures risk-adjusted return, has generally been lower for PG compared to XLP. This indicates that XLP has offered better risk-adjusted returns over the analyzed period.
- The Beta value for PG has consistently been below 1, indicating that PG is less sensitive to market movements than the overall market. As of Q2 2025, PG's beta was around 0.12, suggesting it is significantly less volatile than the market.
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Overall Assessment:
- Based on the analysis, Consumer Staples Select Sector SPDR Fund (XLP) has generally provided better risk-adjusted returns and lower volatility compared to Procter & Gamble Co. (PG). While PG has shown competitive returns over longer periods (2-3 years), its higher volatility and larger drawdowns suggest a riskier investment profile. The lower Sharpe Ratio for PG indicates that investors are not compensated as well for the level of risk they are taking compared to investing in XLP. The consistently low beta for PG suggests it is a stable investment relative to the broader market, but its recent underperformance and higher volatility compared to XLP raise concerns.
Peers Price History(as of 2025-05-23)
- Performance Comparison:
- Procter & Gamble Co. (PG) has shown mixed performance compared to its peer companies. Over the past year, PG has outperformed Colgate-Palmolive Co. (CL) by 1.29% but underperformed The Clorox Co. (CLX) by -0.75%. Looking at longer time horizons, such as the past two and three years, PG has underperformed CL by -7.35% and -5.1%, respectively, while significantly outperforming CLX by 31.92% and 23.45%, respectively. This suggests that PG's performance is highly dependent on the specific time frame considered.
- Risk and Return Analysis:
- The annualized returns show that PG has provided lower returns than CL over the two and three-year periods but has outperformed CLX significantly. For example, over three years, PG's annualized return is 6.88% compared to CL's 8.35% and CLX's -0.45%.
- In terms of annualized volatility, The Clorox Co. (CLX) consistently exhibits higher volatility compared to Procter & Gamble Co. (PG) and Colgate-Palmolive Co. (CL). This indicates that CLX's returns are subject to greater fluctuations.
- The maximum drawdown figures reveal that CLX experienced a maximum drawdown of -34.11% on 11/01/2023, which is substantially larger than PG's -23.77% on 10/10/2022 and CL's -20.39% on 02/06/2025. This suggests that CLX carries a higher level of risk compared to PG and CL.
- Risk-Adjusted Performance:
- The Sharpe Ratio analysis indicates that Colgate-Palmolive Co. (CL) generally offers better risk-adjusted returns compared to Procter & Gamble Co. (PG) and The Clorox Co. (CLX). CL consistently shows higher Sharpe Ratios, while CLX often has lower or negative Sharpe Ratios, indicating poorer risk-adjusted performance.
- The Beta values for all three companies are consistently below 1, suggesting that they are less sensitive to market movements. Procter & Gamble Co. (PG) and Colgate-Palmolive Co. (CL) exhibit more stable beta values compared to The Clorox Co. (CLX), which shows greater fluctuations.
- Overall Assessment:
- Based on the analysis, Colgate-Palmolive Co. (CL) appears to be a more stable and consistent performer, offering better risk-adjusted returns compared to Procter & Gamble Co. (PG) and The Clorox Co. (CLX). While Procter & Gamble Co. (PG) has shown periods of outperformance, it generally provides lower returns than CL and is subject to moderate volatility. The Clorox Co. (CLX) carries a higher risk profile due to its greater volatility and larger drawdowns, making it a potentially less attractive option for risk-averse investors.
- A significant trend is the recent decrease in Sharpe Ratios for all three companies, suggesting a decline in risk-adjusted performance in the most recent periods. Additionally, the beta values for all three companies have remained relatively stable, indicating their defensive nature in relation to market movements.
Peers Fundamentals(as of 2025-03-31)
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Market Position and Size:
- Procter & Gamble (PG) stands out with a significantly larger market capitalization of $388,865.4 million compared to The Clorox Co. (CLX) at $16,131.35 million and Colgate-Palmolive Co. (CL) at $75,036.79 million.
- This substantial market cap is supported by higher revenue ($83,927 million), EBITDA ($22,518 million), and net income ($15,496 million) relative to its peers.
- PG's dominant market position indicates a leading role in the Household/Personal Care industry, with a market capitalization more than five times larger than its closest competitor.
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Profitability and Efficiency:
- PG's gross profit margin of 51.4% is competitive, exceeding both The Clorox Co. and the industry average, but is less than Colgate-Palmolive's 60.73%.
- The company's EBITDA margin of 26.83% and net profit margin of 18.46% are notably higher than both its peers and the industry average, showcasing strong operational efficiency.
- Despite its large size, PG maintains strong profitability metrics, indicating efficient management and cost control.
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Financial Health and Stability:
- PG exhibits a conservative approach to leverage, with a total debt to total equity ratio of 65.31, significantly lower than its peers and the industry average.
- While its current ratio of 0.71 and quick ratio of 0.5 are below industry norms, the lower debt levels suggest a stable financial foundation.
- The company's strong cash flow from operations further supports its financial stability, providing resources for investments and shareholder returns.
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Valuation and Market Perception:
- PG's enterprise value to sales ratio of 5.29 and enterprise value to EBITDA ratio of 19.7 are higher than its peers and the industry average, indicating a premium valuation.
- Its price-to-earnings ratio of 26.34 is in line with its peers but lower than the industry average, suggesting a potentially fair valuation relative to its earnings.
- The market appears to recognize PG's strong market position and profitability, as reflected in its higher valuation multiples.
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Cash Flow and Capital Management:
- PG demonstrates robust cash flow generation, with net operating cash flow of $18,585 million and free cash flow of $15,025 million, significantly higher than its peers.
- The company's capital expenditure of $3,560 million reflects ongoing investments in its business and future growth opportunities.
- PG's strong cash flow allows it to fund its operations, invest in growth initiatives, and provide returns to shareholders through dividends and share repurchases.
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Growth and Future Prospects:
- PG's growth metrics present a mixed picture, with some areas showing slower growth compared to peers.
- The company's 5-year CAGR for net income and basic earnings per share is strong, indicating solid earnings growth potential.
- However, its 3-year CAGR for sales/revenue, EBITDA, free cash flow, and EBIT margin underperforms its peers, suggesting potential challenges in top-line growth and operational efficiency.
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Potential for Investment:
- PG offers a compelling investment opportunity for those seeking stability, dividends, and exposure to the consumer staples sector.
- Its dominant market position, strong cash flow generation, and solid profitability provide a stable financial foundation.
- However, investors should be aware of its slower growth in certain key metrics and higher valuation compared to peers, which may limit its upside potential.
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Key Risks and Considerations:
- Slower growth in sales/revenue, EBITDA, free cash flow, and EBIT margin could pose a risk to PG's future performance.
- Lower return on equity compared to peers may indicate less efficient capital allocation.
- Higher valuation multiples compared to peers could make PG relatively overvalued.
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Overall Assessment:
- Procter & Gamble is a financially strong and well-established company with a dominant market position in the Household/Personal Care industry.
- Its robust cash flow generation, solid profitability, and conservative debt levels provide a stable financial foundation.
- While its growth metrics present a mixed picture, its strong earnings growth potential and commitment to shareholder returns make it an attractive investment for certain investors.
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