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Stock Cheat Sheet: Procter & Gamble

Become an expert in less than five minutes: That's what a Motley Fool Cheat Sheet is all about. If you're new to Procter & Gamble (NYSE: PG  ) , consider this your Foolish way to get introduced and in the know.

What the company does
P&G makes your daily life better. The little things we take for granted -- like Gillette razors, Ivory soap, Duracell batteries, Charmin ultrasoft toilet paper, Old Spice deodorant, etc. -- are P&G's playground. And in that playground are swings and slides that other playgrounds would kill for. P&G has 23 billion-dollar brands, 12 of which are No. 1 global market share leaders. Actually, let me rephrase that, these shouldn't be compared to swings and slides, these are roller coasters in your neighborhood park.

What powers P&G
Innovation is not a word you typically associate with restroom products and personal grooming, but that's precisely what makes P&G stand apart. Procter & Gamble is an innovator. The company actually invented the soap opera as an advertising vehicle for its products (how many other companies have created an entirely new medium just to sell their product?), and it's the creative genius behind the Old Spice guy, possibly one of the greatest ad campaigns of all time.

The company spends more than $2 billion in research and development every year, nearly twice as much as the next-largest competitor, Unilever (NYSE: UL  ) , and has the results to justify it. In the past nine years, almost all of the company's organic sales growth has come from new brands or new product innovations. In the past 14 years, the company has had 114 top 25 best-selling new products in their industry in the U.S. -- more than P&G's six largest competitors combined.

Why you should care
With a $180 billion market cap, $80 billion in sales, and near ubiquity already, you might wonder how much more dominant P&G can get. Yet, the law of large numbers doesn't seem to apply to this leviathan. Over the past five years, the stock has appreciated nearly 30% while the S&P 500 has lost 2%. Over the past 10 years, P&G stock has nearly tripled while the S&P dropped 15%.

Over the past six years, P&G has grown U.S. and international revenue at 6% and 14%, respectively. Clorox (NYSE: CLX  ) , another diversified consumer products manufacturer, with a revenue base 14 times smaller than P&G's (and theoretically 14 times more nimble), was still able to muster only 4% domestic and 11% international growth over the same time period. As the results show, it's very difficult to make any argument that P&G isn't a best-in-class, best-of-breed titan among titans.

Fast facts
Business stats:

  • Billion-dollar brands: 23
  • Half-billion-dollar brands: 20

Business segments (FY2009 revenue):

  • Beauty -- $18.8 billion
  • Grooming -- $7.5 billion
  • Health care -- $13.6 billion
  • Snacks and pet care -- $3.1 billion
  • Fabric care and home care -- $23.2 billion
  • Baby care and family care -- $14.1 billion

If you want to learn more about dominating companies like P&G, check out our premium income newsletter, Motley Fool Income Investor.

Fool analyst Sean Sun owns shares in PG. Clorox, Procter & Gamble, and Unilever are Motley Fool Income Investor picks. Unilever is a Global Gains recommendation. The Fool owns shares of Procter & Gamble. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (7) | Recommend This Article (26)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 16, 2010, at 12:38 PM, CPACAPitalist wrote:

    Old Spice Guy FTW - PG is one of those solid companies you can feel safe investing in.

  • Report this Comment On July 16, 2010, at 12:59 PM, tubavestor wrote:

    I love the idea of a stock cheat sheet (and would love to see more) but this needs a lot more balance. It reads like an ad for P&G and while I'm not opposed to that (I hold PG shares myself) an advertisement is what I can get from just reading the first page of their annual report.

    Howabout in addition to all the positives of the business you include its possible downsides (hopefully by now we've had enough examples that *everything* has risks and assuming they're not there will get you in big trouble sooner or later), its competitors, some of its past problems and how it's handled them, and other things that can give you a few good pointers on what to search for and evaluate if you want to research the company (or its competitors) further?

  • Report this Comment On July 16, 2010, at 5:55 PM, TMFSun wrote:

    tubavestor: Thank you for the comment! I think your suggestion is very valid. The Stock Cheat Sheet concept is something that I want to keep iterating and making better, I think including more discussion of risks is certainly warranted and I'm going to figure out a way to incorporate that going forward.

    Thanks again and I appreciate your support for the concept!

    (P.S. @CPACAPitalist: yes, Old Spice Guy FTW 4 realz)

  • Report this Comment On July 18, 2010, at 11:44 AM, pinestholdings wrote:

    I love the idea of a stock cheat sheet, but there has to be way more included. I understand it under development, but the most important thing in a buy decision - valuation - is completely absent.

    P&G at $60/share is probably a decent buy. P&G at $100/share isn't. That needs to be discussed.

    I am a huge fan of the "get to know a company really well to get an edge on the market" concept. Just needs a LOT more meat on the bones!

  • Report this Comment On July 18, 2010, at 9:18 PM, exec996 wrote:

    I like the cheat sheet. It's a great idea. Maybe with a library of past stocks to call up? Also, add a "buy" or "no buy" up front. That would add some interest. Maybe a thumbs up or down depending on the price at the time?

  • Report this Comment On July 19, 2010, at 1:50 AM, Mstinterestinman wrote:

    I hold JNJ and KO,PG is a great company just wish I had the cash during the flash crash 40 bucks a share now thats a screaming buy.

  • Report this Comment On July 19, 2010, at 1:51 AM, Mstinterestinman wrote:

    I meant they were at 40 a buy at 60 not a bad investment but probably better places for cash out there.

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10/20/2016 3:57 PM
PG $85.00 Down -0.54 -0.63%
Procter and Gamble CAPS Rating: ****
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UL $42.80 Up +0.34 +0.80%
Unilever CAPS Rating: *****