PROCTER & GAMBLE CO (PG): what the price requires

At today's price, PROCTER & GAMBLE CO (PG) is priced for +0.1% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-13 · Source: https://boothcheck.com/report/PG

Headline

FieldValue
TickerPG
CompanyPROCTER & GAMBLE CO
Current price$148.14/sh
CompositionBeauty 18% / Grooming 8% / Health Care 14% / Fabric & Home Care 35% / Baby, Feminine & Family Care 24% / Corporate 1%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed12.9%
Operating margin today23.8%
Margin compression implied-10.9pp
Implied growth0.1%
Multiple paid19x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 7.2% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.7pp.

Reconcile: at the x-ray's 9.3% required return this reads ~14.2%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.12σ
cohort percentile (of 69 peers)48
implied end-window share0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.99x5expensive
Earnings2.47x5expensive
Relative1.51x5expensive
Growth1.38x4expensive

Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.4%); the inversion above states its own rate.

Per-Model Detail (n=19)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$107.411.38xyesFCF base $15.0B, growth 3% (input: historical growth), terminal g 3.4%, WACC 8.4%, 5yr projection
DCF Exit MultipleGrowth$134.201.10xyesExit EV/EBITDA: 15.0x / 17.0x / 19.0x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$137.821.07xyesP/E 22x (sector median), scenarios: 18.5x / 22.0x / 25.5x (bear / base = sector held flat / bull), EV/EBITDA 14x
Simple DDMGrowth——no—
Two-Stage DDMGrowth$97.511.52xyesStage 1: 10% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$74.341.99xyesBV/sh $22.56, ROE (TTM) 30.5%, ke 9.3%
Two-Stage Excess ReturnAsset$139.711.06xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$107.311.38xyesRev $86.7B, growth 3% (input: historical growth; tapered), Terminal P/S: 3.5x / 4.1x / 4.8x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$82.081.80xyesEPS $6.84, growth 10% (input: historical EPS growth), PEG=2.26 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$59.882.47xyesNormalized EBIT (5y avg op income, one-time charges added back) $19.39B × (1−21%) / WACC 8.4% → EPV (no growth)
Residual IncomeAsset$113.631.30xyesBV $22.56 + 5yr PV of (ROE (TTM) 30.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$58.922.51xyes√(22.5 × EPS $6.84 × BVPS $22.56) — Graham's conservative floor
EV/EBITDA RelativeRelative$119.231.24xyesEBITDA $23.23B × sector EV/EBITDA 14.0x
FCF YieldEarnings$51.912.85xyesFCF $15028.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$49.652.98xyesSBC-adj FCF $14.52B (FCF $15.03B − SBC $0.51B) capitalized at Kₑ
Ben Graham FormulaEarnings$158.160.94xyesEPS $6.84 × (8.5 + 2×9.5%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$10.5714.01xyesBV $22.56 × (ROIC 3.9% / WACC 8.4%)
P/Sales SectorRelative$71.772.06xyesRevenue $86.72B × sector P/S 2.0x
PEG Fair ValueRelative$97.931.51xyesEPS $6.84 × (PEG 1.5 × growth 9.5% (input: historical EPS growth)) → PE 14.3x
Earnings YieldEarnings$73.952.00xyesEPS $6.84 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$42.4b
Net debt / NOPAT (after-tax)2.64x
Net debt / operating income (pre-tax)2.08x
Interest coverage23.8x
Share count CAGR (buyback)-1.1%
Burning cashno

Bullet Takeaways

Bull Case

The moat at Procter & Gamble is the most studied one in consumer products, and it is real precisely because it is boring. The company sells things people use up and rebuy without thinking, Tide and Pampers and Gillette and Crest, and it has spent decades making those brands the default choice on the shelf. Scale is the mechanism. P&G's roughly $87 billion of revenue gives it the largest advertising budget, the deepest retailer relationships, and the most research-and-development spend in its categories, which lets it keep its products marginally better and marginally better marketed than the alternatives, year after year. A product that is slightly superior and bought on habit is the closest thing to a recurring revenue stream that a non-subscription business can have.

The financial signature of that moat is hard to argue with. P&G earns a return on equity around 30%, generates about $15 billion in free cash flow annually, and converts its sales into operating margins above 23%. Those are returns that only a genuine competitive advantage sustains, because high returns invite competition, and competition normally erodes them. The fact that P&G has held them for decades is the evidence the moat holds. The balance sheet is a fortress: net debt sits around two times operating income, interest coverage runs above 23 times, and the company has raised its dividend for 70 consecutive years, recently lifting it another 3%. That dividend streak is not a marketing fact; it is the visible output of a business that produces more cash than it needs every single year.

Management is also pulling the levers a mature compounder should. P&G is executing a restructuring that targets up to 7,000 non-manufacturing job reductions, sharpening the cost base, and it has navigated the tariff environment better than feared, cutting its projected fiscal 2026 tariff cost roughly in half from its earlier outlook. Organic sales growth reaccelerated to about 3% in the fiscal third quarter after a flat second quarter. For an investor who wants a business that compounds slowly, returns capital reliably, and survives any economic environment, the bull case is quality, durability, and a 70-year track record of doing exactly that.

Bear Case

The bear case is not about the business, which is excellent; it is about the price, which assumes the excellence comes with growth it does not have. Every family of valuation method lands below where the stock trades. The peer-multiple methods, the earnings-power methods, the asset-based methods, and even the forward-growth methods all sit beneath the price, which means there is no standard lens that frames P&G as anything but richly valued. The reason is the mismatch between the multiple and the growth. P&G trades at roughly a 22x earnings multiple, the kind of premium a market pays for a grower, while its organic sales growth runs in the low single digits, around 1% to 3%, and the inversion shows the price embedding only about 1% operating-income growth as it is. Pay a growth multiple for a no-growth-to-low-growth business and the return comes almost entirely from the dividend and buyback, not from the business expanding.

The category pressures are slow but persistent, and they cap the growth that would justify the premium. P&G's products are mature, penetrated, and increasingly contested by private-label brands that have closed the quality gap in many categories, especially when consumers trade down in a stretched economy. The company grows mostly by raising prices and nudging volumes, and there is a ceiling on how far price can run before shoppers switch to the store brand. The reaccelerating organic sales are encouraging, but mid-single-digit organic growth is the ceiling for a business this large and this penetrated, not a launchpad. The tariff and commodity headwinds, about $0.25 per share for fiscal 2026, are a reminder that input costs press directly on margins in a business with limited ability to pass them through indefinitely.

The valuation leaves little room for any of that to bite. When a stock trades above every method's central estimate, the multiple is the entire cushion, and multiples compress when growth disappoints or when interest rates make a 2%-yielding staple less attractive against bonds. The fortress balance sheet bounds the downside in the sense that P&G is in no financial danger whatsoever, but a strong balance sheet does not protect against paying too much. The bear case is the calibrated one: this is a wonderful company, and at this price the market is asking you to pay a premium multiple for low-single-digit growth, which works only if the premium holds. If the multiple reverts toward where the methods land, the dividend does not save the total return.

Valuation

P&G is a multi-segment consumer staples company, and the right comparison is to its consumer-products peers rather than to the broad market. The price is making a modest bet in growth terms, the inversion embeds only about 1% operating-income growth, but a demanding bet in multiple terms, because it pays a premium price for that low growth. The company earns a 23% operating margin today, well above what the price strictly requires of the economics, which is why the bet is really about the multiple persisting, not about a margin or growth leap.

The methods agree on direction in a way that is itself the signal: every family reads the stock as expensive. The forward-growth methods, which credit the steady low-single-digit cash-flow growth, get closest, landing modestly below the price. The peer-multiple lens, at roughly a 22x sector earnings multiple, also sits a bit below. The static earnings-power and asset methods land furthest below, because capitalizing the current cash flow with no growth, or anchoring on book value, cannot reach a price that embeds a premium for quality and durability. That pattern, no family reaching the price, is the signature of a stock priced for its franchise quality rather than its measurable cash flows. The premium is the market paying for certainty: the 70-year dividend record, the fortress balance sheet, the survives-anything category mix. Whether that premium is warranted is the question the price poses, not one the methods answer.

Solvency is a non-issue and a genuine strength. Net debt around two times operating income, interest coverage above 23 times, and roughly $15 billion of annual free cash flow mean the dividend and buyback are covered many times over, and the share count drifts down about 1% a year. For a staple, the balance sheet frame is capital-return capacity, and P&G's is among the strongest in the market. What the buyer is underwriting is not financial risk but valuation risk: paying a premium multiple for a business whose growth is low and whose moat, while durable, does not accelerate. The downside is bounded by the quality of the franchise; the return is bounded by the multiple staying where it is.

Catalysts

P&G's fiscal 2026 has shown organic sales reaccelerating through the year. Fiscal second-quarter net sales rose about 1% with organic sales roughly flat, then fiscal third-quarter net sales grew about 7% with organic sales up about 3%. Management maintained full-year guidance of all-in sales growth of 1% to 5%, organic sales growth of in-line to up 4%, and core EPS growth of in-line to up 4%, with core EPS guided to roughly $6.83 to $7.09. The next quarterly prints are the read on whether the organic growth reacceleration sustains or fades back toward flat.

The developments shaping the margin story are the restructuring and the cost headwinds. P&G is executing a plan targeting up to 7,000 non-manufacturing job reductions to streamline its cost base, and it cut its projected fiscal 2026 tariff cost roughly in half from an earlier estimate, now around $400 million after-tax, alongside about $150 million in commodity headwinds, together about $0.25 per share. The company also raised its dividend about 3%, extending a 70-year streak of annual increases. The catalysts to watch are the pace of the restructuring savings reaching the margin line, whether organic growth holds in the upper part of its guided range, and any further change in the tariff outlook, since input and trade costs press directly on a business with limited pricing headroom.

Peer Cohorts (Per Segment, With Filing Citations)

Beauty (reported)

Grooming (reported)

Health Care (reported)

Fabric & Home Care (reported)

Baby, Feminine & Family Care (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

P&G FY2026 guidance, 2026 · P&G FY2026 results, 2026

View the full interactive PG report on boothcheck