Procter and Gamble has been earning a return of at least 28% on its net worth per year from 2000 to 2008. It has earnings per share of around Rs. 52 in the last 12 months.
Procter and Gamble has a cash and bank balance of around Rs. 1000 million. It has net current assets of around Rs. 2000 million. It has a net worth of around Rs. 3000 million. It has a market capitalization of around Rs. 39000 million.
At a market price of around Rs. 1200 and earnings of around Rs. 52 the initial rate of return is less than 5 per cent which we could easily get in a fixed deposit! However the value of the company according to me should be around Rs.1500 considering its good long term and short term record.
Procter and Gamble makes Personal Care products and has no debt. Competitors are HUL, Dabur India, Colgate, Godrej Industries and Godrej Consumer.
2 comments:
Can you provide the cost to sales of this company to know the cash surplus and survival possibilities in case of economic problems. I mean macros problems.
Hi Sherin,
The company does not have any debt and has enough cash, net current assets and networth to weather the storm in case of economic problems. It has a good current and quick ratio as well. It also has well know brands like Vicks and Whisper in its portfolio. Also P&G has a stake in Gillette which is another strong brand. All in all its a good company to invest in if you are looking at a long time horizon like I am but I am sure a value investor can wait for the right price.
Regards,
Dilip Lillaney
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