Procter & Gamble (PG)
Consumo básico / Cuidado del hogar y personal
The world's largest consumer staples maker (Tide, Pampers, Gillette, Olay), a dividend king (70 years). Unlike most, it de-rated in 2026 to ~$145 (near its 52-week low): trading at ~21× core earnings, below its ~23x historical average → Fairly valued, with the return coming from the dividend (~2.9%) plus ~5% core growth that near-term headwinds (Greater China, tariffs) are holding back.
- Price
- $145.36
- Intrinsic value (5y, base)
- $173
- Total annual return (5y)
- 6.7%
- Status (nominal)
- Fairly valued
- Margin of safety
- +10%
The essentials
- The world's largest consumer staples maker: 5 segments, leading brands (Tide, Pampers, Gillette, Olay, Crest) with dominant shares (>45% in grooming, >35% in fabric). Dividend king (70 years, $4.35).
- Modest and predictable growth: organic +2-4%, core EPS ~5% (pricing power +1-2% price + volume + buyback ~1%). Near-term headwinds: Greater China, tariffs, soft volumes, private label.
- Unlike the rest of the sector, it de-rated in 2026 → ~$145 (near its 52-week low) at ~21× core earnings (vs ~23x historical, cheaper than KO) → Fairly valued. The return is dividend (2.9%) + ~5% core growth.
Intrinsic value — two valuation methods
Total return at 5 years: 6.7%/year = 3.5% appreciation + 3.1% dividend. The target price ($173) is ex-dividend; the $25 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $182 · Multiples $160) exceeds the market price ($145).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $145 trades ~9.3% below its value discounted to today (~$160); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($173) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$102.
Thesis
The business
PG is a top-quality defensive compounder: the global consumer staples leader, with dominant brands (Tide, Pampers, Gillette), pricing power, ~30% return on capital, and 70 years of dividend increases. Its growth is modest (organic +2-4%, core EPS ~5%) and predictable, but it faces real near-term headwinds: Greater China, tariffs, soft volumes and private label. This is not a business being disrupted; it's a mature, stable franchise going through a growth rough patch.
The valuation
It is valued on P/E over core earnings (ex-restructuring and one-offs such as the Argentina FX charge and the gain from the Glad partnership dissolution). Net income delivers equity directly (the modest ~$25bn net debt lives in the DCF).
The base case projects a value of ~$173 per share five years out, an annual return of ~+7% from the current ~$145. The key point that sets PG apart from the rest of the sector: instead of rallying, it de-rated in 2026 — falling from $167 to ~$145 (near its 52-week low) and trading at ~21× core earnings, below its ~23x historical average and below KO's (~25x). As core earnings grow ~5% and the multiple holds near ~20x (~18×), the return is made up of modest appreciation plus an elevated dividend (~2.9%, the highest yield in years).
The margin of safety
The verdict is Fairly valued: It trades close to intrinsic value, far from the required margin of safety.. Unlike most consumer staples businesses (expensive from the defensive rotation), PG trades at a modest discount to its own history (~21× versus ~23x) and to KO — the 2026 de-rating from near-term headwinds (tariffs, Greater China, guidance toward the low end) opened a reasonable entry into an intact franchise. The expected return (~+7%) is the dividend (~2.9%, 70 years) plus ~5% core growth, with the multiple stable. It's not an extreme bargain, but it is a top-quality dividend king at a sensible price — the margin is moderate.
What to watch
The central disconfirmer: does organic growth hold at +2-4% (pricing power + innovation beating private label), or do volumes erode? The signals: quarter-to-quarter organic volume (improved to +2% in the latest), Greater China's recovery (SK-II, oral care), and core margin against tariffs and input costs (fell 80 basis points despite productivity). And the execution of the restructuring (Jun-2025, 7,000 roles, brand exits): whether it refocuses the portfolio toward where PG has superiority, or just cuts costs.
Educational / informational. Does not constitute investment advice.