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Procter & Gamble (PG) has attracted fresh attention after a stretch of mixed returns, with the stock roughly flat year to date but showing a double digit decline over the past year.
See our latest analysis for Procter & Gamble.
The share price has slipped over the past month, with a 30 day share price return of a 12.66% decline, while the 1 year total shareholder return of a 12.74% decline contrasts with a modest 3 year total shareholder return of 3.61%.
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With Procter & Gamble trading at $142.71 against an analyst price target of $168.00 and an estimated intrinsic discount of about 30%, you have to ask: is this a buying opportunity, or is future growth already priced in?
According to the most followed valuation narrative, Procter & Gamble’s fair value sits at $121.06, which is below the recent $142.71 share price.
Procter & Gamble, despite being within a very competitive industry, still has some competitive advantages. This is reflected in its higher operating margin above the ~20% mark and the Morningstar Wide Moat rating. In addition, the fact that ROIC is double the cost of capital indicates that its capital allocation is being well managed.
Want to see what holds this valuation back despite strong margins and a wide moat? The key assumptions sit in revenue growth, cash flows and future multiples.
Result: Fair Value of $121.06 (OVERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, this view could shift quickly if revenue growth stalls further or if margin pressure weighs on cash flows more than the current assumptions allow.
Find out about the key risks to this Procter & Gamble narrative.
Our DCF model tells a very different story to the $121.06 fair value above. On these cash flow assumptions, Procter & Gamble screens as good value, with the current $142.71 price sitting about 30% below the SWS DCF fair value of $203.99. Which narrative do you find more convincing?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Procter & Gamble for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 61 high quality undervalued stocks. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.