I hate this feeling when there is a good company valued on (very) demanding multiples and share price is steadily going up. Look, does recent events really justify change in valuation from around $80 to around $90?

OK, one can claim that: After a long period of flat or declining sales volumes, the company managed upticks across each of its five product divisions last quarter. That improvement led to a sequential increase in organic revenue growth for just the second time in over two years. Sure it is definitely a good situation. The only problem is that sales is growing around 2% only, which is nominally not a lot and competitors are growing faster. And shares were rerated up by around 15%, so what’s are investors expecting/discounting? Even if company improves margin in my opinion to justify growth by 15% earnings should permanently increase by at least 5% – 10% vs previous expectations, which is rather improbable.

P&G is also very strong comparing to S&P, gaining for the last year around 20%.

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Valuation of around P/E = 21, EV/EBITDA = 15 and dividend yield 3% is only attractive as it comes to the last one. Nevertheless other peers like KMB are paying comparable yield, are cheaper on multiples and are growing faster…

 

Summing up, PG shares are performing significantly stronger than I expected and truth to tell I do not really see a reason why… Too expensive for me.

 

Disclaimer: PG – no position.