Intrinsic value of Procter&Gamble - PG

Previous Close

$93.14

  Intrinsic Value

$66.01

stock screener

  Rating & Target

sell

-29%

  Value-price divergence*

+24%

Previous close

$93.14

 
Intrinsic value

$66.01

 
Up/down potential

-29%

 
Rating

sell

 
Value-price divergence*

+24%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 238.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.37
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  65,058
  66,359
  67,885
  69,630
  71,589
  73,759
  76,140
  78,734
  81,540
  84,565
  87,810
  91,282
  94,987
  98,931
  103,123
  107,572
  112,286
  117,276
  122,553
  128,129
  134,016
  140,228
  146,779
  153,684
  160,960
  168,623
  176,691
  185,183
  194,119
  203,520
  213,408
Variable operating expenses, $m
 
  52,600
  53,707
  54,972
  56,393
  57,967
  59,694
  61,575
  63,611
  65,804
  68,158
  66,206
  68,893
  71,754
  74,795
  78,021
  81,440
  85,059
  88,887
  92,931
  97,201
  101,706
  106,458
  111,466
  116,743
  122,301
  128,153
  134,312
  140,793
  147,612
  154,784
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  51,103
  52,600
  53,707
  54,972
  56,393
  57,967
  59,694
  61,575
  63,611
  65,804
  68,158
  66,206
  68,893
  71,754
  74,795
  78,021
  81,440
  85,059
  88,887
  92,931
  97,201
  101,706
  106,458
  111,466
  116,743
  122,301
  128,153
  134,312
  140,793
  147,612
  154,784
Operating income, $m
  13,955
  13,759
  14,179
  14,658
  15,196
  15,792
  16,446
  17,159
  17,930
  18,761
  19,652
  25,076
  26,093
  27,177
  28,329
  29,551
  30,846
  32,216
  33,666
  35,198
  36,815
  38,522
  40,321
  42,218
  44,217
  46,322
  48,538
  50,871
  53,326
  55,908
  58,625
EBITDA, $m
  16,775
  19,725
  20,178
  20,697
  21,279
  21,924
  22,632
  23,403
  24,237
  25,136
  26,101
  27,133
  28,234
  29,406
  30,652
  31,975
  33,376
  34,859
  36,428
  38,085
  39,835
  41,681
  43,629
  45,681
  47,844
  50,121
  52,520
  55,044
  57,700
  60,494
  63,433
Interest expense (income), $m
  518
  631
  668
  711
  759
  814
  874
  940
  1,012
  1,090
  1,174
  1,265
  1,361
  1,464
  1,574
  1,691
  1,814
  1,945
  2,084
  2,231
  2,386
  2,550
  2,722
  2,904
  3,097
  3,299
  3,512
  3,736
  3,972
  4,221
  4,482
Earnings before tax, $m
  13,257
  13,128
  13,510
  13,947
  14,437
  14,979
  15,572
  16,218
  16,917
  17,670
  18,478
  23,811
  24,732
  25,713
  26,755
  27,860
  29,031
  30,271
  31,582
  32,967
  34,429
  35,972
  37,599
  39,314
  41,120
  43,023
  45,026
  47,135
  49,353
  51,687
  54,142
Tax expense, $m
  3,063
  3,545
  3,648
  3,766
  3,898
  4,044
  4,205
  4,379
  4,568
  4,771
  4,989
  6,429
  6,678
  6,942
  7,224
  7,522
  7,838
  8,173
  8,527
  8,901
  9,296
  9,712
  10,152
  10,615
  11,102
  11,616
  12,157
  12,726
  13,325
  13,956
  14,618
Net income, $m
  15,326
  9,583
  9,863
  10,181
  10,539
  10,934
  11,368
  11,839
  12,350
  12,899
  13,489
  17,382
  18,054
  18,770
  19,531
  20,338
  21,193
  22,098
  23,055
  24,066
  25,133
  26,260
  27,447
  28,699
  30,018
  31,407
  32,869
  34,408
  36,028
  37,732
  39,524

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  15,137
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  120,406
  107,377
  109,847
  112,670
  115,839
  119,351
  123,205
  127,401
  131,943
  136,836
  142,087
  147,705
  153,700
  160,083
  166,866
  174,064
  181,692
  189,767
  198,306
  207,328
  216,854
  226,906
  237,507
  248,680
  260,453
  272,852
  285,907
  299,649
  314,108
  329,320
  345,321
Adjusted assets (=assets-cash), $m
  105,269
  107,377
  109,847
  112,670
  115,839
  119,351
  123,205
  127,401
  131,943
  136,836
  142,087
  147,705
  153,700
  160,083
  166,866
  174,064
  181,692
  189,767
  198,306
  207,328
  216,854
  226,906
  237,507
  248,680
  260,453
  272,852
  285,907
  299,649
  314,108
  329,320
  345,321
Revenue / Adjusted assets
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
Average production assets, $m
  43,996
  44,859
  45,891
  47,070
  48,394
  49,861
  51,471
  53,224
  55,121
  57,166
  59,359
  61,707
  64,211
  66,877
  69,711
  72,718
  75,905
  79,279
  82,846
  86,615
  90,595
  94,794
  99,223
  103,891
  108,809
  113,989
  119,443
  125,184
  131,224
  137,580
  144,264
Working capital, $m
  -3,716
  -5,375
  -5,499
  -5,640
  -5,799
  -5,974
  -6,167
  -6,377
  -6,605
  -6,850
  -7,113
  -7,394
  -7,694
  -8,013
  -8,353
  -8,713
  -9,095
  -9,499
  -9,927
  -10,378
  -10,855
  -11,358
  -11,889
  -12,448
  -13,038
  -13,658
  -14,312
  -15,000
  -15,724
  -16,485
  -17,286
Total debt, $m
  31,592
  19,092
  20,305
  21,691
  23,247
  24,972
  26,863
  28,924
  31,154
  33,556
  36,135
  38,893
  41,837
  44,971
  48,301
  51,836
  55,581
  59,546
  63,738
  68,168
  72,845
  77,781
  82,986
  88,472
  94,252
  100,341
  106,751
  113,497
  120,597
  128,066
  135,923
Total liabilities, $m
  65,222
  52,722
  53,935
  55,321
  56,877
  58,602
  60,493
  62,554
  64,784
  67,186
  69,765
  72,523
  75,467
  78,601
  81,931
  85,466
  89,211
  93,176
  97,368
  101,798
  106,475
  111,411
  116,616
  122,102
  127,882
  133,971
  140,381
  147,127
  154,227
  161,696
  169,553
Total equity, $m
  55,184
  54,655
  55,912
  57,349
  58,962
  60,750
  62,711
  64,847
  67,159
  69,649
  72,322
  75,182
  78,233
  81,482
  84,935
  88,599
  92,481
  96,591
  100,938
  105,530
  110,379
  115,495
  120,891
  126,578
  132,571
  138,882
  145,527
  152,521
  159,881
  167,624
  175,768
Total liabilities and equity, $m
  120,406
  107,377
  109,847
  112,670
  115,839
  119,352
  123,204
  127,401
  131,943
  136,835
  142,087
  147,705
  153,700
  160,083
  166,866
  174,065
  181,692
  189,767
  198,306
  207,328
  216,854
  226,906
  237,507
  248,680
  260,453
  272,853
  285,908
  299,648
  314,108
  329,320
  345,321
Debt-to-equity ratio
  0.572
  0.350
  0.360
  0.380
  0.390
  0.410
  0.430
  0.450
  0.460
  0.480
  0.500
  0.520
  0.530
  0.550
  0.570
  0.590
  0.600
  0.620
  0.630
  0.650
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
Adjusted equity ratio
  0.493
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509
  0.509

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15,326
  9,583
  9,863
  10,181
  10,539
  10,934
  11,368
  11,839
  12,350
  12,899
  13,489
  17,382
  18,054
  18,770
  19,531
  20,338
  21,193
  22,098
  23,055
  24,066
  25,133
  26,260
  27,447
  28,699
  30,018
  31,407
  32,869
  34,408
  36,028
  37,732
  39,524
Depreciation, amort., depletion, $m
  2,820
  5,965
  6,000
  6,039
  6,083
  6,132
  6,186
  6,244
  6,307
  6,375
  6,449
  2,057
  2,140
  2,229
  2,324
  2,424
  2,530
  2,643
  2,762
  2,887
  3,020
  3,160
  3,307
  3,463
  3,627
  3,800
  3,981
  4,173
  4,374
  4,586
  4,809
Funds from operations, $m
  12,472
  15,549
  15,862
  16,220
  16,622
  17,066
  17,553
  18,084
  18,657
  19,275
  19,937
  19,439
  20,195
  21,000
  21,855
  22,762
  23,723
  24,741
  25,816
  26,953
  28,153
  29,419
  30,755
  32,162
  33,645
  35,206
  36,851
  38,581
  40,402
  42,318
  44,333
Change in working capital, $m
  -281
  -105
  -124
  -141
  -159
  -176
  -193
  -210
  -227
  -245
  -263
  -281
  -300
  -320
  -340
  -360
  -382
  -404
  -427
  -452
  -477
  -503
  -531
  -559
  -589
  -621
  -654
  -688
  -724
  -761
  -801
Cash from operations, $m
  12,753
  15,654
  15,986
  16,362
  16,781
  17,242
  17,746
  18,294
  18,884
  19,520
  20,200
  19,720
  20,495
  21,319
  22,194
  23,122
  24,105
  25,145
  26,244
  27,405
  28,630
  29,922
  31,285
  32,721
  34,234
  35,827
  37,504
  39,269
  41,126
  43,079
  45,134
Maintenance CAPEX, $m
  0
  -1,467
  -1,495
  -1,530
  -1,569
  -1,613
  -1,662
  -1,716
  -1,774
  -1,837
  -1,906
  -1,979
  -2,057
  -2,140
  -2,229
  -2,324
  -2,424
  -2,530
  -2,643
  -2,762
  -2,887
  -3,020
  -3,160
  -3,307
  -3,463
  -3,627
  -3,800
  -3,981
  -4,173
  -4,374
  -4,586
New CAPEX, $m
  -3,384
  -863
  -1,032
  -1,179
  -1,324
  -1,467
  -1,610
  -1,753
  -1,897
  -2,044
  -2,194
  -2,347
  -2,504
  -2,666
  -2,834
  -3,007
  -3,187
  -3,373
  -3,567
  -3,769
  -3,980
  -4,199
  -4,429
  -4,668
  -4,918
  -5,180
  -5,454
  -5,741
  -6,041
  -6,355
  -6,685
Cash from investing activities, $m
  -5,689
  -2,330
  -2,527
  -2,709
  -2,893
  -3,080
  -3,272
  -3,469
  -3,671
  -3,881
  -4,100
  -4,326
  -4,561
  -4,806
  -5,063
  -5,331
  -5,611
  -5,903
  -6,210
  -6,531
  -6,867
  -7,219
  -7,589
  -7,975
  -8,381
  -8,807
  -9,254
  -9,722
  -10,214
  -10,729
  -11,271
Free cash flow, $m
  7,064
  13,325
  13,459
  13,653
  13,887
  14,162
  14,474
  14,825
  15,213
  15,638
  16,101
  15,394
  15,934
  16,512
  17,131
  17,791
  18,494
  19,241
  20,034
  20,874
  21,763
  22,703
  23,697
  24,746
  25,853
  27,020
  28,250
  29,547
  30,912
  32,350
  33,863
Issuance/(repayment) of debt, $m
  1,399
  1,054
  1,213
  1,386
  1,556
  1,724
  1,892
  2,060
  2,230
  2,403
  2,578
  2,758
  2,943
  3,134
  3,331
  3,534
  3,745
  3,965
  4,193
  4,430
  4,677
  4,935
  5,205
  5,486
  5,780
  6,088
  6,410
  6,747
  7,100
  7,469
  7,856
Issuance/(repurchase) of shares, $m
  -2,731
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,332
  1,054
  1,213
  1,386
  1,556
  1,724
  1,892
  2,060
  2,230
  2,403
  2,578
  2,758
  2,943
  3,134
  3,331
  3,534
  3,745
  3,965
  4,193
  4,430
  4,677
  4,935
  5,205
  5,486
  5,780
  6,088
  6,410
  6,747
  7,100
  7,469
  7,856
Total cash flow (excl. dividends), $m
  5,703
  14,379
  14,671
  15,039
  15,444
  15,886
  16,366
  16,885
  17,443
  18,041
  18,679
  18,153
  18,877
  19,646
  20,462
  21,326
  22,240
  23,206
  24,227
  25,304
  26,440
  27,639
  28,902
  30,232
  31,633
  33,108
  34,660
  36,294
  38,012
  39,819
  41,719
Retained Cash Flow (-), $m
  2,157
  -1,054
  -1,257
  -1,437
  -1,613
  -1,788
  -1,961
  -2,136
  -2,312
  -2,491
  -2,673
  -2,860
  -3,051
  -3,249
  -3,453
  -3,664
  -3,883
  -4,110
  -4,346
  -4,592
  -4,849
  -5,116
  -5,396
  -5,687
  -5,992
  -6,311
  -6,645
  -6,994
  -7,360
  -7,743
  -8,144
Prev. year cash balance distribution, $m
 
  1,583
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  14,908
  13,414
  13,602
  13,830
  14,099
  14,405
  14,749
  15,131
  15,550
  16,006
  15,293
  15,826
  16,397
  17,009
  17,662
  18,357
  19,096
  19,880
  20,712
  21,592
  22,522
  23,506
  24,545
  25,641
  26,797
  28,015
  29,300
  30,652
  32,076
  33,575
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  14,293
  12,280
  11,837
  11,388
  10,928
  10,454
  9,964
  9,457
  8,933
  8,391
  7,263
  6,753
  6,235
  5,710
  5,185
  4,665
  4,155
  3,661
  3,189
  2,744
  2,330
  1,950
  1,609
  1,306
  1,042
  817
  629
  474
  350
  253
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Procter & Gamble Company is focused on providing branded consumer packaged goods to the consumers across the world. The Company operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care, and Baby, Feminine & Family Care. The Company sells its products in approximately 180 countries and territories primarily through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, distributors, baby stores, specialty beauty stores, e-commerce, high-frequency stores and pharmacies. The Company owns and operates approximately 20 manufacturing sites located in over 20 states in the United States. In addition, it owns and operates over 100 manufacturing sites in approximately 40 countries. It offers products under the brands, such as Olay, Old Spice, Safeguard, Head & Shoulders, Pantene, Rejoice, Mach3, Prestobarba, Venus, Cascade, Dawn, Febreze, Mr. Clean, Bounty and Charmin.

FINANCIAL RATIOS  of  Procter&Gamble (PG)

Valuation Ratios
P/E Ratio 15.5
Price to Sales 3.7
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 18.6
Price to Free Cash Flow 25.4
Growth Rates
Sales Growth Rate -0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.1%
Cap. Spend. - 3 Yr. Gr. Rate -2.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 32.7%
Total Debt to Equity 57.2%
Interest Coverage 27
Management Effectiveness
Return On Assets 12.7%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 17.5%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 27.2%
Return On Equity - 3 Yr. Avg. 18.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 50.9%
Gross Margin - 3 Yr. Avg. 50%
EBITDA Margin 25.5%
EBITDA Margin - 3 Yr. Avg. 24.2%
Operating Margin 21.5%
Oper. Margin - 3 Yr. Avg. 19.2%
Pre-Tax Margin 20.4%
Pre-Tax Margin - 3 Yr. Avg. 18.8%
Net Profit Margin 23.6%
Net Profit Margin - 3 Yr. Avg. 16.5%
Effective Tax Rate 23.1%
Eff/ Tax Rate - 3 Yr. Avg. 24.3%
Payout Ratio 47.2%

PG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PG stock intrinsic value calculation we used $65058 million for the last fiscal year's total revenue generated by Procter&Gamble. The default revenue input number comes from 2017 income statement of Procter&Gamble. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PG stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PG is calculated based on our internal credit rating of Procter&Gamble, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Procter&Gamble.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PG stock the variable cost ratio is equal to 79.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Procter&Gamble.

Corporate tax rate of 27% is the nominal tax rate for Procter&Gamble. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PG are equal to 67.6%.

Life of production assets of 31.4 years is the average useful life of capital assets used in Procter&Gamble operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PG is equal to -8.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $55184 million for Procter&Gamble - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 2556.7 million for Procter&Gamble is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Procter&Gamble at the current share price and the inputted number of shares is $238.1 billion.

RELATED COMPANIES Price Int.Val. Rating
CHD Church&Dwight 47.86 35.01  sell
CL Colgate-Palmol 75.75 9.44  str.sell
JNJ Johnson&Johnso 136.12 96.55  sell
KMB Kimberly-Clark 118.22 10.71  str.sell
CAW CCA Industries 3.30 0.29  str.sell
REV Revlon Cl A 23.15 54.10  str.buy
UN Unilever ADR 61.18 33.52  sell
HELE Helen of Troy 95.60 50.64  sell
UL Unilever ADR 59.84 33.44  sell

COMPANY NEWS

▶ [$$] Nelson Peltz lost P&G board seat battle by a whisker   [Oct-17-17 08:22AM  Financial Times]
▶ P&G reveals it barely won proxy battle   [06:26PM  American City Business Journals]
▶ 3 Things to Watch in the Stock Market This Week   [Oct-15-17 12:00PM  Motley Fool]
▶ Intel, Procter & Gamble Push DJIA Higher Friday   [Oct-13-17 04:01PM  24/7 Wall St.]
▶ [$$] The duel for P&G   [02:10PM  Financial Times]
▶ P&Gs power network charges into Cincinnati: PHOTOS   [01:39PM  American City Business Journals]
▶ [$$] Week in Review, October 14   [01:30PM  Financial Times]
▶ Procter & Gamble Announces Dividend   [Oct-11-17 06:18PM  GuruFocus.com]
▶ New P&G packaging could help clean up beaches   [03:16PM  American City Business Journals]
▶ P&G debuts Justice League commercial   [02:53PM  American City Business Journals]
▶ P&G Vs Peltz: Who You Callin' a Loser?   [12:01PM  Barrons.com]
▶ [$$] P&G's Close Shave   [09:47AM  Barrons.com]
▶ Do activist investors help or hurt shareholders?   [07:49AM  Fox Business Videos]
▶ Cramer: Don't Fear the Activist   [07:01PM  TheStreet.com]
▶ 4 key Wall Street proxy fights   [06:42PM  CNBC Videos]
▶ News Update Market Close   [05:04PM  CNBC Videos]
▶ Here are the top 10 Cincinnati stocks so far this year: SLIDESHOW   [04:56PM  American City Business Journals]
▶ It Ain't Over 'Til It's Over   [04:01PM  Barrons.com]
▶ News Update Afternoon   [02:34PM  CNBC Videos]
▶ Trian disagrees with P&G vote count   [01:22PM  CNBC Videos]
▶ What you need to know on Wall Street today   [01:10PM  Business Insider]
▶ P&G staves off activist investor in proxy battle   [12:43PM  American City Business Journals]
▶ P&G Declares Quarterly Dividend   [09:53AM  Business Wire]
Financial statements of PG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.