PROCTER GAMBLE CO (PG)edit this page
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BUY TARTGET (50-52$) : SELL TARGET(> 60-62$) RISK POTENTIAL- VERY LOW Date - 09 August 2009 : DHARMESH AGARWAL
-PG had the price of 52 almost as back as Apr 2004 apart from the midMarch Crash. -Obviously in past 5 years, the revenue and profits would hv increased substantially -the price on Aug 4 was around 55.5 and now 52...almost 5% down(substantiall as it is a stock like walmart ) -30% revenue comes from the developing economies, though they have NOT hit as hard as America -Consumer industry will not do substantially bad...so the Risk in this stock is much less. It would not decrease by over 10%. Even during march crash its price 44..so presently it is just 17%higher than bottom, whereas DOW has increased by almost 50%.So very less risk. Also this stock is a slow slow...it would take good amount of time to increase as well.but a safe stock to invest if one is expecting 20%return in a year, with possible bonus of additional 10%. -A very low risk stock. -For the 12-month period ended June 30, 2009, Procter & Gamble's (P&G) net earnings increased to $13.44 billion or $4.26 per diluted share, from $12.07 billion or $3.64 per diluted share, in the corresponding period for 2008. i.e from the last year...the earnings have increased by almost 15%...Also the price during Aug,2008 was around 65..so rather the price today should have been 65+ 15% of 65.i.e around 75.!! Keeping the view that price 65 was a rational price last year !
- From Aug 2006 to Jan 2009, the price average has been around 60$... While even if the revenue all remain the same....the price today should have been 60$. (http://www.sec.gov/Archives/edgar/data/80424/000095015208006832/l32996aexv11.htm)
- Net Earnings in 2004 was 2.34 per share whereas in 2008 was 3.86 per share...Even though the net earnings have increased by over 50% , the price difference today is rathere -10%!!
Bad points
Technical References
Procter & Gamble (PG) reported F4Q09 EPS of $0.80 vs. $0.92, $0.01 above consensus. Organic sales were down 1%, below guidance of +0%-3%. Volume declined 4%, in line with our estimate, but price and mix were lower than projected, as PG began adjusting prices down without yet seeing a favorable effect on volume. PG maintained FY10E organic sales growth of 1%-3%, but guided to -3% to 0% for 1Q10, which means growth has to steadily improve to at least 4% by 4Q10 to average at least 1% for the year. PG maintained FY10 EPS guidance of $3.65-$3.80 despite higher sales due to less negative FX—this implies higher spending to drive the turnaround in growth. We maintained FY10E EPS of $3.78 and initiated FY11E EPS of $4.20. To adjust for the higher market multiple, we increased our target P/E to 15x from 13x, and boosted our price target to $60 from $51, based on 15x CY10E EPS of $4.00. Even as economies recover, we believe PG could trade at a lower valuation than historically, because its acquisitions in the past decade have resulted in a portfolio more dependent on discretionary consumer spending.
- The sales growth is just 10% over last 5 years .thought the developing economies have increased by huge % in last 5 years.
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