PG - Procter and Gamble

[boroVika]

After the positive messages above I have a little more pessimistic view on PG.

Let's start to say that i'm not completely negative on the stock. But I think there are better opportunities in the market. With the current conditions PG can be a stable company (it is big and has strong brands). But looking to the future, and considering a longterm hold in the company, I dont think PG is the best opportunity.

My main reason is the valuation. PG is according to me relatively well priced in this market. A p/e of 14 I would call high in these times. I get more convinced in my thougths when looking at the book values. The normal p/b is already 2.5. When studying the balance sheet you should notice the high amount of goodwill and intangibles(almost 100billion), causing a negative tangible book value.
Then dividends. I am a believer in high and stable dividend payments. Looking at dividend history PG has a very good history with stable increasing payments over time. The current yield of 3% is indeed very nice. The same is true for earnings quality (also stable and increasing over time). However prospects for 2010 show a very small decline (which is actually quite okay compared to other companies).
One last concern is financial strength. Some ratios show a poor financial strenght. From the other side PG is a big and stable company. I would recommend further analysis into this.


Conclusion: In general PG is a good company. It has high earnings and dividend quality. It is a big company with strong brands.
But the company is priced well. Also when you for example check the performance of last years, you can see it didnt declined as much as the market. In case of lower valuation, PG would definitely a stock I would consider.
For the long term I dont think PG will be an outperformer. In the current market there are better possibilities.

[admin]

Roger said: ↑
After the positive messages above I have a little more pessimistic view on PG.

Let's start to say that i'm not completely negative on the stock. But I think there are better opportunities in the market. With the current conditions PG can be a stable company (it is big and has strong brands). But looking to the future, and considering a longterm hold in the company, I dont think PG is the best opportunity.

My main reason is the valuation. PG is according to me relatively well priced in this market. A p/e of 14 I would call high in these times. I get more convinced in my thougths when looking at the book values. The normal p/b is already 2.5. When studying the balance sheet you should notice the high amount of goodwill and intangibles(almost 100billion), causing a negative tangible book value.
Then dividends. I am a believer in high and stable dividend payments. Looking at dividend history PG has a very good history with stable increasing payments over time. The current yield of 3% is indeed very nice. The same is true for earnings quality (also stable and increasing over time). However prospects for 2010 show a very small decline (which is actually quite okay compared to other companies).
One last concern is financial strength. Some ratios show a poor financial strenght. From the other side PG is a big and stable company. I would recommend further analysis into this.


Conclusion: In general PG is a good company. It has high earnings and dividend quality. It is a big company with strong brands.
But the company is priced well. Also when you for example check the performance of last years, you can see it didnt declined as much as the market. In case of lower valuation, PG would definitely a stock I would consider.
For the long term I dont think PG will be an outperformer. In the current market there are better possibilities.
Click to expand...
That is a fair assessment. However, using such a strict approach also restricts one from considering classic defensive name such as HJ Heinz [HNZ], Campbells [CPB], and Kellog [K] which all have negative tangible book value. Even uber-yielder Altria [MO] barely qualifies for consideration under this approach as it struggles to eek out a positive tangible book value.

In an environment such as this high yielding, secular blue chips are a safe haven not suitable for only the most ardent of value investors. Based on the Benjamin Graham quote following your post I would say you qualify as such. Although Graham's most famous student has a hefty stake in P&G.

You owe it to yourself to set aside 19 minutes to watch the following (pass it on):
http://youtu.be/jboTeS9Okak
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Perspective:
http://frontpagemag.com/2012/dgreen....p_FrontPageMag
http://www.rushlimbaugh.com/daily/20...nta_claus_wins