Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

P&G (PG) Quick review - a tad too expensive for me.

|Includes:The Procter & Gamble Company (PG)

P&G is currently trading at ~60.  The company made it to my idea pipeline as a 5-star, wide moat stock according to Morningstar

1      Business Performance Risk



FCF / Sales

LTM: 16.5%, between 9% and 17% over last 10 years


LTM: 21.0%, ranging between 16.1 to 40% over last 10 years


Currently 9.7%, ranging between 7.4 and 12% over last 10 years

Revenue Growth

5-year revenue growth of 6.8%, but turned negative in 09-10

Cash distribution to shareholders

Dividend yield: 3.1%, with payout of 40-50%, Buybacks over last 4 years of ~10% of outstanding stocks

Click to enlarge

 Good overall performance, would like to see more ROA though. In addition, is growth a concern going forward?

At current ROE, returns could be around 3.1% dividend, 5% growth and 1.5% buybacks…getting to an all in intrinsic return of 10%?

2      Balance Sheet Risk



LT Debt / Equity

Currently 0.36x – reasonable

Current Ratio

0.8x! Aggressive but manageable given industry and size, range has been between .7x and 1.2x over last 10 years

Click to enlarge

Conservative debt; aggressive but manageable current ratio. Little B/S risk.

3      Valuation Risk



Cash Return



P/E of 17.0x vs. SP of 13.7x and 5-year average of 19.8x

Click to enlarge


Cash return not really high and P/E seems high which may not leave enough margin of safety


Probably not at the current price: good business but recent questions in performance coupled with valuation that does not appear to leave much room for a good margin of safety. For now I will not perform a Company Analysis of PG. If the P/E was to decline to ~15x (or price of !$53) I’d be willing to take another look.

If you are interested, I have more quick reviews here as well as an in-depth analysis of JNJ and APOL there.

Many happy returns!

Disclosure: No position
Stocks: PG