My analysis indicates that the P&G workforce does not weigh much on its profits as compared to its competitors. However, according to the WSJ article noted above, the company has also sought to cut marketing expenses by about $6 billion. This should result in further upside, especially on EBITDA and earnings. Overall, including the staff cuts and marketing expenses, P&G looks to pocket $10 billion in cost savings by 2016, adding that to the $19.7 billion in EBITDA, which gives me nearly $30 billion worth of EBITDA, or $10.95 EBITDA per share, assuming a growth rate of zero for the EBITDA.
With a price to earnings ratio of 2.52 times, The Procter & Gamble Company (NYSE:PG) is slightly more expensive than Kimberly-Clark. However, based on the company’s fundamentals, as analyzed, P&G has the best outlook, and therefore provides more value for money to the investor, than does Kimberly-Clark. On the other hand, Unilever’s earnings are expected to decline going forward. However, in terms of P/E ratio, the U.K-based company is still expensively priced with a P/E of 20.64 times, as compared to P&G’s 17.47 times.
The bottom line
At 12.5% upside YTD, and trading at a P/E ratio of 17.47 as compared to the industry average of 23.61, The Procter & Gamble Company (NYSE:PG) has a long way to go northwards. There is nothing to hold investors back now that the company has promised to reorganize its organizational structure and consequently trim spending on marketing and payroll, while expanding production in the most promising regions. There is no better time to buy this large cap stock, which, above all, promises stability and minimum risk.
Nicholas Kitonyi has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark, Procter & Gamble, and Unilever. Nicholas is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article P&G Is Still Below Par originally appeared on Fool.com and is written by Nicholas Kitonyi.
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