Procter & Gamble (PG 0.63%) stock is on sale right now. Share prices have declined by roughly 12% since the market started slumping in early 2022, reducing its valuation and boosting P&G's dividend yield in the process.

Does that drop make the consumer staples giant an obvious buy for investors today, or should you pass on this stock and look for growth elsewhere? Let's take a closer look.

Growth at a price

At a glance, P&G's business looks like it is humming along with excellent momentum. Organic sales were up 5% in the most recent quarter after having jumped 7% in the prior fiscal year. Its focus on consumer staples is helping keep revenue rising even as shoppers pull back on spending in areas like consumer electronics and entertainment.

There are flashing warnings signs, though.

Procter & Gamble's volumes are declining, falling 6% in the most recent quarter. Sure, this drop was offset by rising prices. But P&G's customers are being more cautious in their spending lately. Executives in late January said the company is in a "very difficult cost and operating environment." Rivals including Kimberly-Clark are feeling the same pinch.

Dropping margins

That tough environment is hurting earnings, too. P&G reported declining operating margin last quarter despite aggressive cost-cutting and higher prices. Management estimates that financial pressures, including currency exchange rate shifts and inflation, will combine to reduce earnings by $3.7 billion in fiscal 2023.

PG Operating Margin (TTM) Chart

PG Operating Margin (TTM) data by YCharts

Still, Procter & Gamble remains highly profitable both when compared to its peers and compared to the pre-pandemic period. Operating margin is comfortably above 20% of sales today while Kimberly-Clark's comparable metric is below 15% of sales.

Cash and outlook

Procter & Gamble shares have become cheaper in recent months, but the stock is hardly a screaming value. Investors have to pay 4.4 times sales for the stock today, down from a pandemic high of about 5. Yet that valuation still translates into a significant premium compared to Kimberly-Clark and its P/S ratio of 2.1.

Owning P&G gives you several advantages that you wouldn't get through buying Kimberly-Clark, though. Besides its market-leading position in several consumer staples niches ranging from beauty care to paper towels, P&G has a huge worldwide sales footprint. Its pricing power and efficiency help insulate the business from the profit pressures tied to slowing consumer spending, too.

That doesn't mean the business is immune to the effects of a recession. In fact, P&G's declining sales volumes into early 2023 suggest that sales growth will likely slow again this year. On the other hand, investors aren't likely to see the type of huge negative surprises that might happen with companies focused on more discretionary parts of the consumer spending budget.

Risk-averse investors will also love P&G's dividend, which should continue rising through whatever selling environment develops in 2023 and 2024. This year's dividend raise, likely to be announced in April, will mark the company's 67th consecutive annual hike. Management is also planning to spend as much as $8 billion on stock buybacks this year.

While the stock could always become cheaper, these positive factors point to solid returns for investors who hold P&G over the next several years.