Should one Consider Buying or Selling Procter & Gamble (P&G) Shares at the Price Point of $160?

Should one Consider Buying or Selling Procter & Gamble (P&G) Shares at the Price Point of $160?

Procter & Gamble (P&G), the consumer goods giant, has shown a mixed performance and valuation relative to the S&P 500 over the past few years.

In the current year of 2025, P&G's stock has underperformed the S&P 500, declining about 5% while the S&P 500 gained roughly 7%. This underperformance is linked to P&G lowering its full fiscal year outlook due to a slowdown in consumer demand.

Over the last three years, P&G's top-line growth averaged about 1.8% annually, which is significantly slower than the S&P 500’s average growth rate of 5.5% during the same period. In the most recent quarter, P&G's revenue declined by approximately 2.1% year-over-year, highlighting some challenges in sustaining growth.

Despite these revenue pressures, P&G maintains solid fundamentals. The company's earnings per share (EPS), return on equity (~32.7%), and debt-to-equity ratio (~0.47) all indicate financial stability.

P&G appears slightly more expensive on some valuation metrics compared to the broader market. The price-to-sales (P/S) ratio is 4.5 for P&G versus 3.1 for the S&P 500. The price-to-free cash flow (P/FCF) ratio is 25.1 for P&G versus 20.9 for the S&P 500. However, P&G is somewhat cheaper on a price-to-earnings (P/E) basis, with a ratio of 24.3 compared to the S&P 500's 26.9.

In terms of financial strength, P&G's Operating Income over the last four quarters reached $20 Bil, reflecting a moderate Operating Margin of 23.8%. In the past 12 months, P&G's revenues remained at $84 Bil.

It is important to note that P&G's stock has faced challenges in the past, such as during the Global Financial Crisis (2008) when it fell 40.8% from a high of $74.67 on 12 December 2007 to $44.18 on 9 March 2009. However, the stock fully recovered to its pre-Crisis peak by 28 July 2020. The stock also experienced a decline of 24.3% from a peak of $163.41 on 28 April 2022 to $123.76 on 10 October 2022, but it has since risen to a peak of $179.70 on 2 December 2024 and is presently trading at approximately $160.

Investors should exercise caution and weigh the risks linked to falling sales and moderate profitability when making investment choices regarding P&G stock. However, the company's resilience and financial health suggest it may continue to weather current headwinds.

[1] Trefis Market-Beating Portfolios suggest a potential upside of 15% for Procter & Gamble's stock, with a price estimate of $182 per share. [2] Data from Yahoo Finance as of 1 January 2025. [3] Procter & Gamble's annual report 2024. [4] Procter & Gamble's Q4 2024 earnings call transcript.

1. Given the recent underperformance of Procter & Gamble's stock and the slowdown in consumer demand, investors might want to carefully consider the company's financial prospects, such as its dividend and valuation, in light of the S&P 500's performance before making any investing decisions.
2. While P&G's valuation metrics, such as P/S and P/FCF, may appear more expensive compared to the broader market, strategic investors might find it interesting to evaluate the company's finance, including its financial strength, EPS, and return on equity, before determining their position in the stock-market, considering the potential for a 15% upside as suggested by Trefis Market-Beating Portfolios.

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