The Procter & Gamble Company (NYSE:PG)‘s recent earning reports weren’t too impressive: they showed low growth in revenue and narrower profit margins. Is this the right company for investors who seek low-risk investments in the stock market? Are there other low-thrill companies worth considering instead of The Procter & Gamble Company (NYSE:PG)?
Is Procter & Gamble growing?
According to the company’s recent financial reports, among P&G’s five operating segments, grooming was the most profitable: its profitability reached 27.1% during the recent quarter and 30.6% during the fiscal year. The table below summarizes the company’s revenue, profit margins and yearly change in revenue for each business segment during the 2013 fiscal year.
Despite the high profit margin in the grooming segment, its revenue fell by 4% during the year. Moreover, this segment is the smallest – it accounts for only 10% of The Procter & Gamble Company (NYSE:PG)’s total revenue. If this trend persists, it could shrink the company’s profit margin further in the near future.
Not so bad
But the company’s situation isn’t dire: its sales volumes rose during the past 12 months by nearly 2%. The company also raised prices by roughly 1%, which helped counter the adverse effect of unfavorable foreign-exchange developments. Considering the potential changes that central banks could implement in the coming years, the unfavorable currency shifts are likely to keep adversely affecting The Procter & Gamble Company (NYSE:PG)’s bottom line.
How is the company doing compared to other leading consumer-goods companies?
Two other big consumer-goods companies are Johnson & Johnson (NYSE:JNJ) and Colgate-Palmolive Company (NYSE:CL). In terms of revenue growth, Johnson & Johnson has outperformed both companies: its net revenue increased 8.5% in the second quarter. In comparison, The Procter & Gamble Company (NYSE:PG) and Colgate-Palmolive Company (NYSE:CL)’s net revenue grew by 2.2% and 1.9%, respectively. Most of Colgate-Palmolive’s revenue growth came from Asia/Africa: this region accounts for 21% of its revenue, a number that increased by 8% during the recent quarter.
Johnson & Johnson (NYSE:JNJ) also leads the way in terms of profitability (after controlling for write-downs of intangible assets and other non-operational provisions), as seen in the chart below.
J&J’s high profit margin compared to the above-mentioned companies is partly due to its high profit margin in the pharmaceutical segment. Profit margins for the company’s pharmaceutical segment and consumer segment were 39.2% and 14.4%, respectively. These companies’ profits are also rolled back to their shareholders via dividend payments.