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What PG’s Target Price and Valuation Indicate

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Rating and target price

The majority of Wall Street analysts providing recommendations on Procter & Gamble (PG) stock maintain a neutral outlook. Wall Street expects near-term cost headwinds and unfavorable currency rates to hurt the company’s net sales and EPS growth rate. However, innovation-driven products, productivity savings, and a lower effective tax rate are projected to support the top and bottom lines.

Among the 24 analysts covering PG stock, 16 analysts suggest a “hold,” seven analysts maintain a “buy,” and one analyst suggests a “sell.” Wall Street has a consensus target price of $89.23 per share on PG stock, which implies a downside of 3.4% based on its closing price of $92.41 as of November 9.

Wall Street also maintains a neutral outlook on other CPG stocks including Kimberly-Clark (KMB), Colgate-Palmolive (CL), Clorox (CLX), and Church & Dwight (CHD).

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Valuation

Procter & Gamble stock is trading at 21.0x its estimated fiscal 2019 EPS of $4.41 and at 19.6x the fiscal 2020 estimated EPS of $4.72. Both these ratios look unattractive based on the projected growth rates of 4.5% and 7.0%, respectively, in those periods.

In comparison, Kimberly-Clark stock is trading at a forward PE multiple of 16.5x. Meanwhile, Colgate-Palmolive, Clorox, and Church & Dwight are trading at forward PE ratios of 21.7x, 24.9x, and 27.4x, respectively.

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