How PG’s Valuation Looks Now


Nov. 20 2020, Updated 3:57 p.m. ET

Valuation summary

As of March 8, Procter & Gamble (PG) was trading at a 12-month forward PE (price-to-earnings) ratio of 22.7x. Currently, the company is trading at a higher valuation multiple than the S&P 500 Index’s forward PE of 18.7x as well as the S&P 500 Consumer Staples Index’s forward PE of 21.2x.

By comparison, Procter & Gamble’s forward PE multiple is higher than Kimberly-Clark (KMB), which was trading at a forward PE ratio of 21.1x. However, the company is trading at a lower multiple than Colgate-Palmolive (CL) and Clorox (CLX), which have forward PE ratios of 25.1x and 24.5x, respectively, as of March 8.

We should point out here that the 12-month forward PE differs among companies based on several factors, including growth expectations, leverage, profitability, and risk-return profiles.

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Growth expectations

Currently, analysts expect Procter & Gamble to generate revenue of $65.1 billion in fiscal 2017, which remains more or less flat YoY (year-over-year). The management has also stated that its reported sales numbers are expected to remain flat in fiscal 2017 on account of adverse currency movements and minor brand divestitures.

Analysts expect the company’s fiscal 2017 adjusted EPS (earnings per share) to rise 4.7% to $3.84. This adjusted EPS excludes the impact of non-recurring items. The management expects its adjusted EPS growth to be in the mid-single digits for fiscal 2017, as compared to its adjusted EPS of $3.67 in fiscal 2016.

The uphill battle

Procter & Gamble is leaving no stone unturned to drive top line growth, which we’ve seen the improved organic sales during the first half of the current fiscal year. However, macro headwinds, adverse currency movements, and slow growth in certain markets are likely to remain a drag in the near-term.

ETF investors looking for exposure to Procter & Gamble can consider the Fidelity MSCI Consumer Staples Index ETF (FSTA), which invests 11.2% of its portfolio in the company.

For more updates, visit Market Realist’s Consumer Products page.


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