The Procter & Gamble Company : A lot of downside potential
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06/26/2012 | 11:56am
Opinion : Bearish under 61 USD
Target price : 56.9 USD
Stop loss: 56.9 USD
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NYSE
Household Products |
The Procter & Gamble Company is focused on providing consumer packaged goods. The company’s products are sold in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores, the neighborhood stores, which serve many consumers in developing markets. As of June 30, 2011, P&G was organized into six segments: Beauty; Grooming; Health Care; Snacks and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care.
On June 20th, P&G lowered its earnings guidance for the current quarter and for the fiscal year 2013 for the second time in two months because of slowing demand in Europe and China and the negative impact from foreign exchange rates.
From a fundamental viewpoint, Procter & Gamble is very expansive for a large and mature company. It is currently trading 16.2 times its 2012 EPS estimated and it has an EV/EBITDA of 10.2x. Growth rate for the coming years are low. Leverage is high with almost USD 30 million of debt. Besides, analysts decreased constantly their EPS and revenues estimates for 2012 and 2013.
Technically, the security is in a downward trend. All moving averages have a bearish configuration. Few days ago, there was a huge gap because of the announcement and this trend may continue in the coming days towards the USD 56.9 support.
Therefore, a potential decline is suggested by weak fundamentals and graphical analysis. Investors should take a short position immediately. The target price is USD 56.9. To avoid important losses, a stop loss will be fixed in the USD 61 area.
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Valuation |
2013e |
2014e |
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PER (Price / EPS)
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19,6x |
18,5x |
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Capitalization / Revenue
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2,58x |
2,49x |
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EV / Revenue
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2,88x |
2,78x |
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EV / EBITDA
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12,8x |
11,9x |
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Yield (DPS / Price)
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2,88% |
3,14% |
| Profitability |
2013e |
2014e |
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Operating Margin (EBIT / Sales)
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18,9% |
19,6% |
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operating laverage (Delta EBIT / Delta Sales)
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22,9x |
2,29x |
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Net Margin (Net Profit / Revenue)
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13,9% |
14,2% |
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ROA (Net Profit / Asset)
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8,72% |
8,88% |
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ROE (Net Profit / Equities)
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18,0% |
18,6% |
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Rate of Dividend
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56,7% |
58,2% |
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