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Procter & Gamble : 2022 promises to be stable

Procter & Gamble, stock, Procter & Gamble : 2022 promises to be stable

The company is considered one of the world's largest producers of consumer goods. The company produces almost everything for everyday life, from paper towels to cosmetics. This is not the only major manufacturer in this field that differs from competing organizations in scale.

The aggregate indicator of the company's market capitalization is close to $390 billion. The list of products includes everything that a person may need at home. Thanks to the high quality of goods and a fairly affordable price, the company has long won the love of consumers. The company has an extensive distribution network, outstanding quality of marketing services, honed to perfection.

Procter & Gamble is engaged not only in the sale of already developed products, but also in the continuous improvement of its products. One of the most important features for investors is regular dividend payments, which have been going on for more than 130 years. Over the entire specified period, payments have increased 65 times. Quarterly increased by 10% only over the period of last year, and reached $0.87 per asset.

In the last 10 years, the company's business can really be called prosperous. However, the company achieved true records during the pandemic. Then the demand for household goods soared to high levels. The company's management has focused its attention on the process of improving the company in all industries. This allows you to stimulate the profitability of the enterprise.

Today, the organization focuses on those products whose production stimulates maximum demand. Over the past few years, PG has made changes in marketing, packaging materials and stabilized pricing policy, determining the cost of almost all groups of goods at the average level. These actions made it possible to increase the company's option margin from 18% to almost 23% over the current 7 years.

Business prosperity

The last financial year for the company ended on June 30, 2021. During the period, the issuer received 7% more revenue than in the previous one, which in monetary terms amounted to 76.1 billion dollars. The diluted profit on paper increased by 11%, and reached $5.66.

In a new financial milestone, the company started on a positive note. Net sales in the amount of $20.34 billion were reported for Q1 alone, which showed an increase of 5.3% compared to the same period last year. Later, analysts revised their forecasts for Procter & Gamble, and today they are at a position of $19.87 billion in Q2 alone. The company demonstrated strong growth in organic net revenue throughout the reporting quarter, which was driven by a 2% increase in sales and an average 1% increase in commodity prices.

The company is considered dominant in its sector, and can dictate pricing policy, which largely compensates for all costs and the growth of inflation. Regardless of the small increase in the value of goods, PG products enjoy consistently high consumer demand. Diluted earnings per asset for Q1 of the current year amounted to 1.2% and increased to $1.61 per quarter. This figure slightly exceeded the forecast of $1.59, and today everyone expects a 3% increase in sales by the end of the 2022 fiscal year.

P&G - consistently high dividends

The company's dividend payments are growing at a high rate. However, is the low dividend payout ratio sufficient to withstand at least a short-term decline in the profitability of the enterprise? Let's assume that payments will grow by 7% every quarter, that is, approximately by $0.93 per asset. In this situation, it is assumed that the company will pay $3.54 per share. If we compare it with the diluted earnings on the same non-GAAP indicator = $5.92 expected by the company by the end of the year, then this corresponds to a ratio of 59.8%. Such a ratio ensures parity between shareholder payments and investments for growth in the future.

Balanced asset value

It's not even worth arguing that the stock is backed up by quite powerful fundamentals. However, does it correspond to the real value? The forward P/E of the enterprise is at the level of 25.7, which is significantly less than the average for the sector, where it is close to 32. This demonstrates the investment attractiveness of the paper.

However, it is very important in this regard to consider the prospects for further growth of the company in comparison with competitors. This will help you understand whether the paper is undervalued or overvalued. Note that the company's annual profit of 7% indicates that the indicator is average for the industry. Over the last five years, the paper has grown 2 times, and today it is sold at a price 27 times higher than the forward profit estimate. At the same time, the dividend yield is less than the industry average of 2.1%. The company pays only 55% of its free cash flow on dividends, which allows it to continue increasing the amount of dividend payments. Moreover, this dynamic will continue, even if the company is waiting for a period of stagnation.

Throughout 2021, the company has been characterized by stable indicators, and it is expected that this trend should continue this year. The increase in dividend payments for each year makes this asset extremely attractive to investors. However, today the market is directed downwards, and it is too early to talk about the purchase of paper. But you can plan to buy it in the future at a fairly favorable cost. Experts recommend waiting for a position of $ 160, and buying towards the $185 limit.

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