- By GF Value
The stock of Procter & Gamble Co (NYSE:PG, 30-year Financials) appears to be modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $135.45 per share and the market cap of $333.5 billion, Procter & Gamble Co stock shows every sign of being modestly overvalued. GF Value for Procter & Gamble Co is shown in the chart below.
Because Procter & Gamble Co is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 4.4% over the past three years and is estimated to grow 4.06% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Procter & Gamble Co has a cash-to-debt ratio of 0.38, which is in the middle range of the companies in the industry of Consumer Packaged Goods. GuruFocus ranks the overall financial strength of Procter & Gamble Co at 6 out of 10, which indicates that the financial strength of Procter & Gamble Co is fair. This is the debt and cash of Procter & Gamble Co over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Procter & Gamble Co has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $74 billion and earnings of $5.29 a share. Its operating margin is 23.79%, which ranks better than 94% of the companies in the industry of Consumer Packaged Goods. Overall, the profitability of Procter & Gamble Co is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Procter & Gamble Co over the past years: