Looking at a broad spectrum of areas such as FMCG Sector in
USA, P&G’s past and current position in the market and the overall US
economy, certain things about the said company can be predicted and external
prospects can be drawn. The company is investing more in organic products for
the ever so health conscious consumers.
Taking a quick look at the stock prices, the price index of
Procter and Gamble company (NYSE:PG) has 10 months is 1.03186, which is
calculated by current share price and share price 10 months ago. A ratio, which
is above 1, indicates a future increase in price over the coming weeks.
With the rapid growth of digitalization, the company can
increase its sales through tie-ups with e commerce giants like amazon.
Talking about the food products, Tesco and Wal-Mart are
already booming the sales to threefold with P products. P is one of the top 50 companies on S 500 in
terms of dividend distribution. The company has continued to increase its
dividend yield year and intends to do so going forward. The company has churned
its product portfolio, discontinuing or selling the unprofitable brands of the
company. This has impacted the revenue growth of the company but going forward
the company will reap the benefits of this strategy as it is now focused on
increasing its market share with brands where it already has strong tailwinds
like Tide, Pampers, Gillette and Olay. P sells products in more than 180
nations.. In its divestment strategy the company sold off its be battery brand
Duracell to Berkshire Hathaway for $4.7 billion and it also sold 43 beauty
brands to Coty Inc. for $12.5 billion. From a brand portfolio of 170, P
has brought it down to 65.
From the money that P received from its asset sales, a
large portion was used for share buyback. The companies when they feel that
their stock is undervalued generally go for a buyback, which was justified with
the DCF calculation. Even with the sales decrease, the margins of the company
have continued to increase and with the scale at which the company operates,
margins are expected to expand even further. P has the 3rd
highest margins in its peer group and has the lowest tax rate among the
P’s expansion in under developed economies and
emerging markets like India and China will also support the company going
forward. The company also has several
competitive advantages. P&G has several brands generating revenue in excess
of $1 billion in annual sales. The core brands of the company hold leadership
positions in their sectors. To retain its position the company has spent
heavily on advertising. In 2017 the company has spent $7.1 billion on
advertising. The company also invests heavily on R&D, which will help the
company maintain its leadership position in the market. P&G has a
recession-resistant business model, which is why the company only saw a sudden
fall in stock price after the 2008 crisis; there was no major change to the
topline and bottom line of the company.
P&G is a very strong company. It is highly profitable,
has strong brands and huge global growth opportunities and one can only expect
it to grow further going forward.