BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUY BUY RATING SINCE 11/20/2015 TARGET PRICE $103.94 BUSINESS DESCRIPTION The Procter & Gamble Company provides branded consumer packaged goods to consumers in the United States, Canada, Puerto Rico, Europe, the Asia Pacific, Greater China, Latin America, India, the Middle East, and Africa. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change -2.05 9.13-0.16 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 0.81-0.15-6.25 Net Income 5.12 45.60 13.40 EPS 6.00 5.94-0.44 Sector: Consumer Non-Discretionary Sub-Industry: Household Products Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY TARGET PRICE $103.94 105 100 95 90 85 80 75 70 RETURN ON EQUITY (%) Ind Avg S&P 500 Q1 2018 18.03 141.00 13.41 Q1 2017 16.76 127.77 11.79 Q1 2016 12.79 365.67 12.91 P/E COMPARISON 24.06 EPS ANALYSIS¹ ($) 24.48 Ind Avg 25.45 S&P 500 Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History RECOMMENDATION We rate () a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. Although no company is perfect, currently we do not see any significant nesses which are likely to detract from the generally positive outlook. HIGHLIGHTS Despite its growing revenue, the company underperformed as compared with the industry average of 2.3%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. 500 250 0 has improved earnings per share by 6.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PROCTER & GAMBLE CO increased its bottom line by earning $3.68 versus $3.49 in the prior year. This year, the market expects an improvement in earnings ($4.17 versus $3.68). Q1 0.96 Q2 1.01 Q3 0.81 2016 Q4 0.71 Q1 1.00 Q2 0.93 Q3 0.93 2017 NA = not available NM = not meaningful Q4 0.82 Q1 1.06 2018 1 Compustat fiscal year convention is used for all fundamental data items. Net operating cash flow has increased to $3,631.00 million or 20.03% when compared to the same quarter last year. In addition, has also modestly surpassed the industry average cash flow growth rate of 17.76%. The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that 's debt-to-equity ratio is low, the quick ratio, which is currently 0.68, displays a potential problem in covering short-term cash needs. The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Household Products industry and the overall market on the basis of return on equity, has underperformed in comparison with the industry average, but has exceeded that of the S&P 500. PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -2.5% 12.5% ENR UNFAVORABLE SPB 16% KMB EBITDA Margin (TTM) CHD CLX WDFC FAVORABLE CL 30% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $1.7 Billion and. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -2.5% 12.5% UNFAVORABLE HRG -1% Earnings Yield (TTM) CENTA CENT CHD CLX FAVORABLE WDFC KMB CL SPB ENR Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -1.9% and 12.3%. Companies with NA or NM values do not appear. 8% INDUSTRY ANALYSIS The household products industry is comprised of companies engaged in the manufacturing of non-durable consumer goods such as cleaning products, detergents, disinfectants, brooms, mops, towels, rags, disposable plates, and cutlery. The industry is mature, slow-growing, and price competitive. Major players are Procter & Gamble (), Colgate-Palmolive (CL), Kimberly-Clark (KMB), Clorox (CLX), and Energizer (ENR). The industry is concentrated and capital intensive. Demand is driven by population growth and consumer preferences. Individual company profit depends on product innovation, effective sales and marketing, and efficient operations. Large companies have scale advantages in purchasing, manufacturing, distribution, and marketing, and smaller companies compete using specialization and niche product offerings. The industry has experienced slow growth and intense competition over the years in established markets such as the United States, Europe, and Australia. There is increasing retail consolidation in developed markets, which puts price pressure on various manufacturers. US companies face issues related to patent and trademark protection, government approval, registration of products, compliance, and approval from the Food and Drug Administration (FDA), the Consumer Product Safety Commission, the Environmental Protection Agency, and Federal Trade Commission. Price competition, promotional activities and product introductions are critical factors influencing the industry. Quality, value, packaging, and changes in policies related to retail customers, also impact company performance. The global household products industry generates revenue in excess of $72 billion per year, of which approximately 30% is from the US. Within the industry, textile washing product sales remain among the most lucrative market segment. Product innovations and demographic gains are expected to result in incremental profit growth. Looking forward, the industry faces intense price and sales competition. For companies to achieve earnings growth, they will need to reduce operational costs, achieve optimal utilization of production capacity, and efficiently align sales operations to their sales networks. Increasing research and development activities can help companies introduce new products and obtain patents. The US market for household cleaning products is anticipated to grow at a compound annual growth rate of 2%. PEER GROUP: Household Products Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 89.99 228,301 24.06 65,193.00 15,465.00 SPB SPECTRUM BRANDS HOLDINGS I 114.88 6,620 22.79 5,007.40 295.80 CL COLGATE-PALMOLIVE CO 72.45 63,619 27.97 15,283.00 2,307.00 KMB KIMBERLY-CLARK CORP 119.76 42,126 19.76 18,221.00 2,166.00 HRG HRG GROUP INC 17.35 3,481 NM 5,008.50 106.00 ENR ENERGIZER HOLDINGS INC 45.93 2,790 14.26 1,755.70 201.50 CENTA CENTRAL GARDEN & PET CO 38.57 1,946 25.38 2,054.48 78.83 CENT CENTRAL GARDEN & PET CO 39.63 1,946 26.07 2,054.48 78.83 CLX CLOROX CO/DE 139.29 17,960 25.60 6,030.00 714.00 WDFC WD-40 CO 119.40 1,667 32.10 380.51 52.93 CHD CHURCH & DWIGHT INC 47.09 11,769 27.06 3,639.10 448.20 The peer group comparison is based on Major Household Products companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION The Procter & Gamble Company provides branded consumer packaged goods to consumers in the United States, Canada, Puerto Rico, Europe, the Asia Pacific, Greater China, Latin America, India, the Middle East, and Africa. The company's Beauty segment offers hair care products, including conditioners, shampoos, styling aids, and treatments; and skin and personal care products, such as antiperspirant and deodorant, personal cleansing, and skin care products. It markets its products under Head & Shoulders, Pantene, Rejoice, Olay, Old Spice, Safeguard, and SK-II brands. The company's Grooming segment provides shave care products comprising female and male blades and razors, pre- and post-shave products, and other shave care products; and appliances that include electric razors and epilators under the Braun, Fusion, Gillette, Mach3, Prestobarba, and Venus brands. Its Health Care segment offers toothbrushes, toothpastes, and other oral care products; and gastrointestinal, rapid diagnostics, respiratory, vitamin/mineral/supplement, and other personal health care products under the Crest, Oral-B, Prilosec, and Vicks brands. The company's Fabric & Home Care segment provides fabric enhancers, laundry additives, and laundry detergents; and air care, dish care, P&G professional, and surface care products under the Ariel, Downy, Gain, Tide, Cascade, Dawn, Febreze, Mr. Clean, and Swiffer brands. Its Baby, Feminine & Family Care segment offers baby wipes, diapers, and pants; adult incontinence and feminine care products; and paper towels, tissues, and toilet paper under the Luvs, Pampers, Always, Tampax, Bounty, and Charmin brands. The company sells its products through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, distributors, baby stores, specialty beauty stores, e-commerce, high-frequency stores, and pharmacies. The Procter & Gamble Company was founded in 1837 and is based in Cincinnati, Ohio. One Procter & Gamble Plaza Cincinnati, OH 45202 USA Phone: 513-983-1100 http://www.pginvestor.com Employees: 95000 STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 3.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 50% of the stocks we rate. Total Return 2.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 40% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 2.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 40% of the stocks we monitor. Solvency 5.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 90% of the companies we analyze. Income 4.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 80% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the first quarter of its fiscal year 2018 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income during the past quarter when compared with the same quarter a year ago, however, it was unable to keep up with the growth of the average competitor within its industry. has liquidity. Currently, the Quick Ratio is 0.68 which shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow. 1.14 Q2 FY17 4.17 E 2018(E) 4.44 E 2019(E) During the same period, stockholders' equity ("net worth") has decreased by 5.91% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. INCOME STATEMENT Net Sales ($mil) 16,653.00 16,518.00 EBITDA ($mil) 4,584.00 4,649.00 EBIT ($mil) 3,892.00 3,921.00 Net Income ($mil) 2,853.00 2,714.00 STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 16,007.00 15,941.00 Total Assets ($mil) 122,851.00 129,043.00 Total Debt ($mil) 34,214.00 31,125.00 Equity ($mil) 54,818.00 58,262.00 PROFITABILITY Gross Profit Margin 55.45% 56.14% EBITDA Margin 27.52% 28.14% Operating Margin 23.37% 23.74% Sales Turnover 0.53 0.51 Return on Assets 12.58% 8.23% Return on Equity 18.03% 16.76% DEBT Current Ratio 0.91 1.09 Debt/Capital 0.38 0.35 Interest Expense 115.00 131.00 Interest Coverage 33.84 29.93 SHARE DATA Shares outstanding (mil) 2,537 2,676 Div / share 0.69 0.67 EPS 1.06 1.00 Book value / share 21.61 21.77 Institutional Own % NA NA Avg Daily Volume 6,983,865 6,065,093 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 11/20/2015. As of 11/30/2017, the stock was trading at a price of which is 5.0% below its 52-week high of $94.67 and 10.9% above its 52-week low of $81.18. 2 Year Chart BUY: $74.84 2016 $100 $90 $80 MOST RECENT RATINGS CHANGES Date Price Action From To 11/30/15 $74.84 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/30/2017) 44.19% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.85% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 24.96% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. 's P/E ratio indicates a discount compared to an average of 24.48 for the Household Products industry and a value on par with the S&P 500 average of 25.45. Conducting a second comparison, its price-to-book ratio of 4.16 indicates a premium versus the S&P 500 average of 3.24 and a significant discount versus the industry average of 26.91. The current price-to-sales ratio is well above the S&P 500 average and above the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 24.06 Peers 24.48 Average. An average P/E ratio can signify an industry neutral price for a stock and an average growth expectation. is trading at a valuation on par with its peers. Price/Projected Earnings 20.27 Peers 22.38 Average. An average price-to-projected earnings ratio can signify an industry neutral stock price and average future growth expectations. is trading at a valuation on par with its peers. Price/Book 4.16 Peers 26.91 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 3.50 Peers 3.34 Average. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a valuation on par with its industry on this measurement. DISCLAIMER: Price/CashFlow 16.99 Peers 17.23 Average. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a valuation on par to its peers. Price to Earnings/Growth 1.87 Peers 3.03 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 5.94 Peers 13.49 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher -0.15 Peers 0.30 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5