Valuation 

Procter & Gamble’s (PG) impressive organic sales, productivity savings, and lower effective tax rate supported its stock. Procter & Gamble stock has risen 12.2% on a YTD (year-to-date) basis and trades at a forward PE ratio of 22.1x, which looks expensive given the projected mid-single-digit growth rate. Procter & Gamble stock trades higher than its historical average multiple of 20.4x.

Procter & Gamble’s organic sales are expected to sustain the momentum due to higher pricing and a favorable mix. Productivity savings and the lower outstanding share count are expected to cushion the company’s earnings.

Procter & Gamble’s Valuation and Analysts’ Rating

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However, challenges in the grooming and baby care business and higher commodity costs are expected to hurt its financials. We expect higher commodity and logistics costs to have a negative impact on the profit margins of other consumer packaged goods companies including Colgate-Palmolive (CL), Kimberly-Clark (KMB), Clorox (CLX), and Church & Dwight (CHD).

Rating and target price

Among the 25 analysts covering Procter & Gamble, 14 recommended a “hold,” ten recommended a “buy,” and one recommended a “sell.” Analysts have a target price of $103.52 on Procter & Gamble stock, which is on par with its closing price on April 23.

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