Blog

• Ever wondered if Procter & Gamble stock is a hidden gem or already priced for perfection? Let’s break down whether there’s value hiding beneath the surface for thoughtful investors like you.

• The stock just gained 2.2% in the past week, although it’s still down 0.8% this month and has slipped 9.1% year-to-date, hinting at shifting expectations and perhaps new opportunities or risks.

• Market chatter has centered on Procter & Gamble’s expansion in emerging markets and its commitment to sustainability. Both of these factors have caught investors’ eyes recently, adding buzz and possibly some uncertainty about what’s next for the company.

• Right now, Procter & Gamble has a valuation score of 2 out of 6. This means it screens as undervalued on just two checks out of a possible six, so there’s certainly more to uncover. We’ll explore how this score stacks up using classic valuation approaches, and at the end, I’ll show you a smarter way to think about value beyond the usual metrics.

Procter & Gamble scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and then discounting those amounts back to today’s dollars. This method provides insight into what the business may be worth, based on the money it is likely to generate in the coming years.

For Procter & Gamble, the current Free Cash Flow stands at $15.4 Billion. Analysts forecast steady growth in these cash flows, projecting they will reach about $21.4 Billion in 2035. Notably, analysts have only made explicit forecasts through 2028 (with 2028 FCF projected at $17.0 Billion). Later years are based on cautious, methodical extrapolations. All figures are in US dollars.

By discounting each year’s expected cash flows back to a present value, the DCF model calculates Procter & Gamble’s intrinsic value at about $185.05 per share. This is roughly 18.4% higher than the current trading price. This suggests that the stock is presently undervalued based on these long-term cash flow expectations.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Procter & Gamble is undervalued by 18.4%. Track this in your watchlist or portfolio, or discover 917 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Procter & Gamble.

The Price-to-Earnings (PE) ratio is a primary valuation tool for profitable companies like Procter & Gamble. It shows investors how much the market is willing to pay for each dollar of the company’s earnings, making it a quick way to assess whether a stock is trading at a premium or discount relative to its profits.

A fair PE ratio depends on factors such as expected company growth and the perceived risk of its future. Higher earnings growth and lower risk tend to support a higher PE ratio, while greater uncertainty or slower growth usually warrant a lower ratio.

Currently, Procter & Gamble trades at a PE ratio of 21.4x. This is above the Household Products industry average of 17.6x, and just slightly above the peer average of 20.5x. Although comparisons like these can be helpful, they do not always provide the full picture because each company has unique growth rates, risks, and profitability profiles.

Simply Wall St’s “Fair Ratio” is a proprietary metric that estimates the PE you might expect for Procter & Gamble when considering its earnings growth, industry, profit margins, risks, and market cap. Instead of relying solely on averages, the Fair Ratio evaluates both the company and its environment for a more tailored benchmark.

With a Fair Ratio of 25.8x compared to the actual 21.4x multiple, Procter & Gamble appears undervalued according to this more comprehensive approach.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1422 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simplified framework allowing investors to build and share their own story or perspective about a company like Procter & Gamble. This approach connects the company’s business fundamentals to future estimates and ultimately to a fair value. Instead of just crunching numbers, Narratives let you combine your assumptions about revenues, earnings growth, and margins with your take on what really drives the business. This makes the investment process more personal and insightful.

Narratives are available to everyone on Simply Wall St’s Community page and are already used by millions of investors. They streamline the decision process by showing how your unique outlook translates into a financial forecast and a fair value estimate. You can then compare that fair value with the current market price to decide if it’s time to buy or sell. Narratives aren’t static, either. When big news or earnings updates come in, these stories and their valuations automatically adjust, so your perspective stays relevant in real time.

For example, one investor’s Narrative for Procter & Gamble might forecast slow growth and margin pressure, leading to a low fair value estimate of $105. Another could anticipate robust innovation and buybacks, supporting a high target like $186. Narratives empower you to turn your own informed view into actionable insight.

For Procter & Gamble, we will make it easy for you with previews of two leading Procter & Gamble Narratives:

🐂 Procter & Gamble Bull Case

Fair value estimate: $169.05

Currently 10.8% undervalued compared to last close ($150.92)

Projected revenue growth: 3.2%

• Analyst consensus expects steady revenue growth, margin improvement, and robust earnings by 2028, supporting a fair valuation above the current market price.

• Growth drivers include product innovation, cost efficiencies, share repurchases, and expanding presence in various consumer segments.

• Risks include volatility in core markets, geopolitical tensions, tariffs, and currency fluctuations, all of which could impact revenue and margins if not addressed.

🐻 Procter & Gamble Bear Case

Fair value estimate: $119.81

Currently 26% overvalued compared to last close ($150.92)

Projected revenue growth: 4.7%

• Despite strong brand strength and operational efficiency, future growth is expected to remain modest and align with inflation, causing limited upside.

• Valuation methods such as DCF, dividend models, and historical comparisons all point towards a current trading price above estimated fair value, suggesting the stock is richly valued.

• P&G remains a high-quality, stable dividend payer, but investors may need to be cautious about buying at current prices unless fundamental growth or margin expansion accelerates.

Do you think there’s more to the story for Procter & Gamble? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include PG.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com