Procter & Gamble (P&G) Stock Analysis (FY 2021)

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This stock analysis is directed in particular at risk-averse investors, in other words investors who are looking for sort of a safe haven. Procter & Gamble (hereinafter “P&G”), a multinational consumer goods company, provides numerous non-cyclical product brands to its consumers making the stock price less vulnerable to economic crises. We delve into the company’s history, business model and CEO, provide you with a comprehensive SWOT analysis and highlight the company’s most recent financials based on our exclusive roovestor company score.
Procter & Gamble (P&G) Stock Analysis Header
Procter & Gamble | North America | Consumer Goods | Fiscal Year 2021 | ISIN: US7427181091

Table of Contents

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Qualitative Analysis

P&G Company History

Early Years

The history of the company dates back to 1837 when candlemaker William Procter and soapmaker James Gamble decided to start a joint soap and candles company – on the advice of their father-in-law. Nowadays, the company can look back on more than 180 years of company history. In fact, the company survived the American Civil War (1861-1865), as well as World War I (1917-1918) and World War II (1941-1945). During American Civil War, P&G provided soap and candles to the Union Army. The two founders were talented at identifying people’s needs and bringing appropriate (in some cases problem-solving) consumer products to the market. In terms of revenue, it took P&G about 20 years to hit the USD 1 million mark.

Expanding the product portfolio

P&G’s first major product brand has been launched back in 1879 – Ivory Soap, a single bar of soap that worked for both, laundry and bathing. Shortly after World War II, the company introduced Tide as the world’s first heavy-duty detergent, following by the first soft toothbrush in 1949 and several more product brands and innovations in the years after. P&G’s global expansion began around 1930 after acquiring Thomas Hedley Co. – a British soapmaker (known for Fairy Soap). Since then, the company’s products and brand spread around the world. Another milestone was in 1956 when P&G hit its USD 1 billion sales mark after aprox. 120 years of company history. 5 years later, in 1961, P&G revolutionized the market for Baby Care. Pampers came to the market and we all know that the brand name became synonymous with diapers due to its outstanding success.

The product porfolio became "quite messi"

The company’s product range has continued to grow historically, increasing the risk of losing focus by becoming “quite messi”. Back in 2014, P&G therefore announced to drop around 100 of its 165 brands at that time to have a greater focus on the top-performing brands that account for 95 % of total revenue. The company divested its U.S. liquid inhalant business, numerous beauty brands with lower revenue growth rates accepting that the Group’s sales and headcount will decline significantly. In 2021, P&G’s total revenue was USD 76 billion after USD 84 billion in 2013 which is a decrease of around -10 %, but net earnings attributable to P&G increased from USD 11 billion in 2013 to USD 14 billion in 2021 (+26 %). This improvement in profit shows that P&G made the right decision in streamlining the company.

P&G Business Model

P&G Brand Overview roovestor
Illustration 1: P&G’s branded products divided into 10 categories
What looks like a Solitaire session, is an overview of P&G product brands divided into 10 categories. P&G describes itself as a company “providing branded products of superior quality and value to improve the lives of the world’s consumers, now and for generations to come”. No doubt, everyone of us has used or consumed P&G products more than once in our lives. The company’s business model is to identify consumer needs and to create appropriate problem-solving consumer goods to satisfy these needs – ideally under a product brand. To that end, P&G puts USD 1.8 million to USD 1.9 million into research and development – every year!
In Q4/2021, Health Care was the best-performing business segment. Both Oral Care (especially Power Brush and Whitening) and Personal Health Care achieved organic growth in the mid-teens compared to the year ago. This strong performance is partly caused by Covid-related consumption decline in the base period. On the other hand, the Baby, Feminine and Family Care Segment recorded a negative organic sales growth (-1 %). Whereby Baby and Feminine Care performance in terms of organic sales growth was positive, Family Care dropped significantly (double digits) due to a Covid-related consumption surge in the base period.
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P&G SWOT Analysis

P&G has strong consumer goods brands (e.g. Tide, Pampers, Gilette) whereby many are non-cyclical making P&G a top stock for risk-averse investors. 10 product categories ensure a high level of product diversification which is crucial to further minimize product risk. Furthermore, economies of scale are among the company’s strengths. With more than 75 billion USD of revenue (FY 2021), P&G is a consumer goods giant, with operations in approximately 70 countries and high efficiencies in processes and costs.
Over the past 180+ years, P&G has established many innovative and problem-solving consumer goods. But in fact, one of the company’s (as well as the whole consumer goods industry’s) weakness is the imitability of its products with limited USP potential. It is the nature of defensive stocks not to expect strong price gains in the short term, which makes P&G a less interesting stock for traders and investors focused on high growth trends.
Thanks to P&G’s financial strength, opportunities from M&A activities emerge. This will help to further expand the product range, step into new markets and strengthen the brand. But there are several more opportunities making sure that P&G remains popular among investors. Global consumer wealth, which grew +7.4% in 2020 according to Credit Suisse’s Global Wealth Report 2021, increases purchasing power year by year, providing P&G further growth potential. Additionally, P&G could strengthen its e-commerce website and make it more global to bring the company’s distribution strategy to the next level.
Among the company’s threats, fake products are one major risk. P&G entered into a cooperation with U.S. Customs and Border Protection (U.S. CBP) in order to prevent counterfeit P&G products from entering the U.S. market. In the consumer goods industry, competition and price war are generally intense, which poses a further risk for the company. Colgate-Palmolive and Unilever are direct competitors with a high focus on emerging economies. Trade barriers in some countries are making the global business strategy more difficult.

P&G CEO: David S. Taylor

P&G’s current and next CEO
Illustration 2: P&G’s current and next CEO
David S. Taylor is P&G’s current Chairman of the Board, President and CEO. In July 2021, the company announced that Vice Chairman and COO Jon R. Moeller will replace Taylor in November 2021 as President and CEO. Since this stock analysis is based on FY 2021, we focus on Taylor who has held the CEO role since November 2015 and thus also led P&G through the Corona crisis. Taylor’s bio reveals that he is a true company veteran with P&G in-house experience of more than 40 (!) years. He has held several leadership roles from Production Manager (1980) to Marketing Director (1996), President of the Global Family Care business unit (2005) and finally P&G’s President and CEO (2015).
Taylor’s leadership style at P&G is characterized by 8 principles: Showing respect to all individuals, inseparability of the company’s and individual’s interests, strategic focus on work, innovation as a key element of corporate success, valuing mastery, seeking to be the best and external focus. Together with his management team he’s aiming to drive the company’s transformation back to sustainable, balanced growth and value creation. Macroeconomic factors pose some problems in achieving the company’s defined targets.
In a CNBC interview Taylor explained that especially the current cost environment is very challenging due to rising commodity prices and freight costs. Companies around the world are experiencing purchase prices affected by inflation in recent times. We expect that (sooner or later) consumer goods companies like P&G, Unilever or Henkel will pass higher costs to their customers, but the rapid process especially in the price development of shipping goods makes it hard for those companies to react just in time.
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Quantitative Analysis

P&G roovestor company score

roovestor company score for P&G
Illustration 3: roovestor company score for P&G (FY 2021)

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We assume no liability for the accuracy of the financial data. Sources of the financial data are foremost IR websites of the company subject to the analysis. Additionally we rely on further data and information from Thomson Reuters EIKON. Moreover, unless better data is available, we do our own calculations of available data for KPI determination. Our stock analyses are by no means to be understood as a buy or sell recommendation and do not provide any conclusions regarding the future development of the company (and thus the future price development of the share).