VALUATION HIGHLIGHTS
- Fabric Care and Home Care constitutes 37% of the Trefis price estimate for Procter & Gamble's stock.
- Baby & Family Care constitutes 23% of the Trefis price estimate for Procter & Gamble's stock.
- Beauty constitutes 18% of the Trefis price estimate for Procter & Gamble's stock.
WHAT HAS CHANGED?
- PG Stock Performance In Recent Years
The changes in PG stock over the recent years have been far from consistent. Returns for the stock were 21% in 2021, -5% in 2022, -1% in 2023, and 17% in 2024.
In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 - indicating that PG underperformed the S&P in 2021, 2023 and 2024.
- Q2FY2025 Earnings
P&G reported net sales of $21.9 billion in Q2'25 (fiscal ends in June), compared to $21.4 billion in Q2'24, led by a 1% volume gain and 1% contribution from product mix. Core EPS came in at $1.88, reflecting a 2% y-o-y rise.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
P&G's EBITDA Margin: Driven by successful cost-saving initiatives, P&G's EBITDA margin saw a slight increase from 27.8% in 2020 to 28.6% in 2024. Looking ahead, we anticipate further margin expansion for P&G, fueled by its ambitious cost-savings program, a focus on productivity enhancements, and the divestment of underperforming brands. This margin improvement could lead to a 10% upside to our price forecast if P&G achieves an EBITDA margin of 34% by the end of our forecast period, compared to our current projection of around 30%.
BUSINESS SUMMARY
Procter & Gamble (P&G) is a multinational corporation operating in over 180 countries, producing and marketing a wide array of consumer goods across its core business segments: beauty, grooming, health care, household care, and baby care.
This extensive global presence, coupled with easy access to capital, empowers P&G to invest significantly in research and development (R&D), brand development, marketing initiatives, direct-to-consumer engagement, and comprehensive market research. Furthermore, P&G's established international network of retail channels provides a robust pathway to capitalize on high-growth opportunities within emerging markets by effectively reaching end consumers.
KEY TRENDS
Huge R&D budget and product innovation
With an annual R&D investment of around $3 billion, P&G significantly outspends its competitors, including Unilever. This robust investment fuels the regular launch of improved and innovative products, allowing P&G to maintain and grow its market share. Trefis views this focus on innovation, especially in premium segments, as vital for boosting profitability, considering P&G's already large scale and high market concentration in developed markets such as the U.S., Western Europe, and Japan.
Sustained marketing efforts to defend market share
P&G maintains a significant investment in advertising and brand promotion. Trefis considers P&G's strong advertising and marketing capabilities to be crucial for driving sales growth by keeping brands fresh and protecting its dominant market share.
