Please ensure Javascript is enabled for purposes of website accessibility

Why Procter & Gamble Co Shares Sank 13% in 2015

By Travis Hoium - Jan 11, 2016 at 11:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Could 2015 be the beginning of a long, slow decline for Procter & Gamble Co?

What: Shares of the normally stable Procter & Gamble Co (PG -0.22%) fell 12.8% in 2015, according to S&P Capital IQ data, and its operations look to be in further trouble heading into 2016.

So what: Disappointment for Procter & Gamble starts on the top line, where the company is having a hard time generating higher sales at home and abroad. In the third quarter, volume was down 5% and net sales dropped an incredible 12%. Foreign currency translation accounted for three-quarters of the drop in net sales, but the fact that volumes are declining so rapidly is troubling for the company.

Despite the drop in sales, the company reported a 4% increase in earnings from continuing operations before taxes, showing that it's squeezing more out of less revenue. That's good for now, but there's a limit to how high margins can go, and focusing too hard on near-term profitability can lead to trouble financially long-term.

Now what: Procter & Gamble still makes valuable consumer products that are in demand around the world, but it hasn't found any great growth markets in years. And without ways to revitalize its brands, there's growing pressure from competitors making similar products. The company is now little more than a no-growth dividend stock, and if that's all it is, there's not a lot of value for investors. Shares are trading at 29 times trailing earnings and the dividend yield of 3.3% is nice, but there are higher yields out there. I don't see any catalysts for P&G to have improving fortunes in 2016, and this could be the start of a slow decline for the company.

Travis Hoium owns shares of Procter & Gamble. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Procter & Gamble Company Stock Quote
The Procter & Gamble Company
$148.91 (-0.22%) $0.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.