Algorithmic Analysis Suggests Procter & Gamble Is Undervalued
The Proctor & Gamble Company (PG)
Most consumers and investors are familiar with Procter & Gamble (PG), a corporate giant specializing in beauty, health and family care products that services millions of consumers in over 180 countries and territories. A corporation with a long history of market success, Procter & Gamble accounts for more than fifty percent of the laundry product market and approximately twenty percent of the male shaving market. Despite its rock-solid dividend payments and balance sheet, most investors are reluctant to go for P&G due to its reputation as a blue chip that may be experiencing difficulties holding onto its share of the domestic market. That strategy, however, doesn’t account for P&G’s rapid expansion into foreign markets like China, India and Brazil, as well as its push to optimize efficiency and cut costs within the firm by focusing on its core markets. Combined with Procter and Gamble’s constant emphasis on innovation, this makes for some very optimistic prospects for the P&G stock. The I Know First self-learning algorithm has a strong bullish signal both in the short-term and within a year, as P&G’s innovation and cost-cutting strategies develop further.
Business Projections
P&G is one of the most accomplished and credible veterans of the international stock market, paying steady dividends to its shareholders for 124 years and maintaining a steady cash flow and PE ratio. Further, its stock has been consistently going up in the past five years, mainly due to its expansion into the international markets and its ruthless swallowing of smaller competitors. The current yield of dividends and earnings per share, however, has surpassed even the rock-solid five year average, marking a good time for investors to get in before the other changes P&G is planning to make.
Figure 1. Procter and Gamble’s earnings and dividends per share have been slowly growing in the past decade, indicating its status as a stable blue-chip stock.
There are many advantages that Procter and Gamble has consistently been able to claim in the past decade. The company holds one of the broadest and most diverse ranges of products in the world, specializing in five distinct segments: beauty, grooming, fabric and home care, health care, and family and baby care. The diversification often helps P&G avoid the volatility and fluctuation that affect specific sectors. Over the years, it has developed a strong brand portfolio which serves almost 4.8 billion people around the world, including but not limited to Pantene, Olay and Tide. Procter and Gamble also has a strong history of product innovation and consistent expansion into profitable markets, such as its expansion into the feminine care market, of which P&G now controls approximately 30%. Seven of ten most innovative non-food products of 2013 were credited to Procter and Gamble, indicating the strength of the firm’s innovation and R&D.
