The Procter & Gamble Company (PG): Why This Stock Has High Dividend and Revenue Potential

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On comparing these giants against few parameters, it is very much evident that Colgate Palmolive is highly overvalued. It has a price to book value of 31 as compared to Procter & Gamble and Unilever plc (ADR) (NYSE:UL) with 3.4 and 6.4. Leverage for Colgate-Palmolive Company (NYSE:CL) is also very high at 7.64 with Unilever having a leverage of 3.47.

PG UL CL
PE 20.5 20.8 24
Yield 3.1 3.3 2.31
P/B 3.4 6.4 31
FCF /Sales% 11.14 9.14 15.77
Leverage 2.1 3.47 7.64

Colgate has the highest oral care market share of 45.8%. However, Colgate-Palmolive Company (NYSE:CL) has shown a decline in its first quarter earnings to $460 million from $593 million in first quarter 2012. The primary reason for this is the devaluation in Venezuelan currency which contributes to 5% of the company’s revenue.

For Unilever plc (ADR) (NYSE:UL), developing markets represented 55% of revenue in 2012. According to Unilever, continuous growth is a function of sustainable supply chain. The company is in plans to sign joint business development plans with strategic suppliers to deepen their relationships. It has also opened 50 new factory and warehouse in developing and emerging markets to deliver sustainable growth. However, with the stock being overvalued and comparatively high on leverage, its valuation is discounted on the lower side.

Conclusion

Considering the company’s expansion plans and huge opportunities in developing markets, The Procter & Gamble Company (NYSE:PG) can be considered as a good long term investment opportunity. The company’s undervaluation as compared to its peers and a strong dividend history also makes it an attractive buy.

The article Why This Stock Has High Dividend and Revenue Potential originally appeared on Fool.com and is written by Anjum Khan.

Anjum Khan has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble and Unilever. Anjum is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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