P&G: Worth a Look
We suggest investors interested in the household and personal-care space consider taking a stake in this wide-moat name.
We walked away from
Despite the significant brand rationalization the firm has undergone the past two years (shedding more than 100 brands from its mix, leaving it with just 65 brands), we still contend P&G maintains significant scale and negotiating leverage with retailers, given that the brands with which it parted ways accounted for less than 15% of total sales and around 5% of consolidated profits. We don’t expect to alter our $92 fair value estimate, and haven’t wavered on our long-term DCF expectations--annual top-line growth about 4% over the next 10 years and 24%-plus operating margins (from 21% in 2016). With shares trading at more than a 10% discount to our valuation, we’d suggest investors interested in the household and personal-care space consider taking a stake in this wide-moat name.
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