Is Procter & Gamble a Strategic Bet? - Colgate-Palmolive (NYSE:CL), Church & Dwight Co (NYSE:CHD)

Procter & Gamble PG reports preliminary financial results for the year ended 2013-06-30.

Procter & Gamble Co. discussed it's Q4 2013 earnings yesterday. Based on these results we analyze PG's performance over the last twelve months (unless stated otherwise). Our analysis is peer-based and we analyze PG compared to the following companies: Johnson & Johnson JNJ, L'Oreal S.A. (EURONEXT PARIS: OR), Colgate-Palmolive Co. CL, Reckitt Benckiser Group PLC RBGPF, Kimberly-Clark Corp. KMB, Estee Lauder Cos. Cl A EL, Henkel AG & Co. KGaA ADS HENKY, Clorox Co. CLX, Church & Dwight Co. CHD and Unilever PLC ULVR.

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The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Annual (USD million)	2013-06-30	2012-06-30	2011-06-30	2010-06-30	2009-06-30
Revenues	84,167.0	83,680.0	82,559.0	78,938.0	79,029.0
Revenue Growth %	0.6	1.4	4.6	(0.1)	(5.4)
Net Income	11,312.0	9,169.0	11,797.0	10,946.0	11,293.0
Net Income Growth %	23.4	(22.3)	7.8	(3.1)	(6.5)
Net Margin %	13.4	11.0	14.3	13.9	14.3
ROE %	17.3	13.9	18.3	17.6	17.1
ROA %	8.3	6.8	8.9	8.3	8.1

Long-term Strategic Bet?

While Procter & Gamble's revenues growth has been below the peer median in the last few years (2.2% vs. 4.0% respectively for the past three years), the market still gives the stock an about peer median PE ratio of 21.1. The market seems to see the company as a long-term strategic bet.

PG's annualized rate of change in capital of 3.8% over the past three years is less than its peer median of 5.6%. This below median investment level has also generated a less than peer median return on capital of 11.3% averaged over the same three years. This outcome suggests that the company has invested capital relatively poorly and now may be in maintenance mode.

Earnings Quality

The company's net income margin for the last twelve months is around the peer median (13.4% vs. peer median of 12.0%). This average margin combined with a level of accruals that is around peer median (4.2% vs. peer median of 3.7%) suggests there possibly isn't too much accrual movement flowing into the company's reported earnings.

Procter & Gamble's accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer median and suggests the company is recording a proper level of reserves compared to its peers.

Accrual Trend Charts

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Company Profile

Procter & Gamble Co. PG provides branded consumer packaged goods to its consumers around the world. It operates through the following segments: Beauty, Grooming, Health Care, Fabric Care and Home Care and Baby Care and Family Care. The company was founded by William Procter and James Gamble in 1837 and is headquartered in Cincinnati, OH.

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