Is Procter & Gamble Still a Top-Notch Investment?

With shares of Procter & Gamble (NYSE:PG) trading at around $78.03, is PG an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

Procter & Gamble has made many changes recently, but all the fear surrounding the company seems to have been overplayed. This even includes insiders. Sometimes an outsider is more accurate simply because every little detail isn't being overanalyzed. Procter & Gamble has many positives, including:

Strong cost savings Consistent innovation (Tide Pods, Always Radiance, Bounty Trap & Lock, Bounty Unstoppables) Diversified product portfolio Excellent marketing Brand recognition Emerging market growth (40 percent of sales vs. 20 percent of sales in 2003)

Procter & Gamble's restructuring means four sectors opposed to five beginning July 1, 2013. These sectors will include:

Global Baby, Feminine and Family Care Global Beauty Global Health and Grooming Global Fabric and Home Care

As you can see, there is a big emphasis on global.

As far as revenue goes, it has increased on an annual basis. Earnings have been inconsistent, but profits are always healthy. On a year-over-year basis, revenue increased 2 percent last quarter, and earnings increased 6.40 percent. If you exclude Wall Street expectations, Procter & Gamble is doing just fine.

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As far as valuation is concerned, Procter & Gamble is trading at 17 times earnings whereas Johnson & Johnson (NYSE:JNJ) is trading at 23 times earnings and Kimberly-Clark (NYSE:KMB) is trading at 21 times earnings. However, all three of these companies are long-term winners. And Procter & Gamble is trading at 18 times forward earnings whereas Johnson & Johnson is trading at 15 times forward earnings and Kimberly-Clark is trading at 16 times forward earnings. Procter & Gamble and Johnson & Johnson have the most impressive profit margins at 15.61 percent and 15.22 percent, respectively. Kimberly-Clark has a profit margin of 8.58 percent. In regards to yield, the numbers are once again similar. Procter & Gamble currently yields 3.10 percent, Johnson & Johnson yields 3.20 percent, and Kimberly-Clark yields 3.30 percent.

Procter & Gamble is cutting $10 billion in costs by 2016. Many of these cuts will come via the workforce. These cuts (not just in the workforce, but in an overall sense) should help improve margins and improve earnings. However, Procter & Gamble still has growth potential as well, especially in emerging markets.

All that said, there are negatives for Procter & Gamble as well, which include:

A weak consumer High gas costs Rising interest rates Unemployment and underemployment Weakness in Europe Competitive pricing Soft beauty sales (Procter & Gamble is highly focused on improving in this area) Weak guidance

In regards to company culture, it's strong at Procter & Gamble. This is a good sign because happy workers often mean increased productivity. Despite Procter & Gamble planning layoffs of 2 percent to 4 percent of the workforce every year through 2016, employees have still rated their employer a 3.9 of 5, and 88 percent of employees would recommend the company to a friend.

Let's take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Mixed

Procter & Gamble hasn’t performed well over the past months, but it has been steady over a three-year time frame.

	1 Month	Year-To-Date	1 Year	3 Year
PG	-0.60%	16.85%	28.94%	40.94%
JNJ	0.02%	23.48%	36.72%	62.01%
KMB	-4.60%	18.19%	24.37%	77.36%

At $78.03, Procter & Gamble is trading below its 50-day SMA, but still above its 200-day SMA.

50-Day SMA	78.36
200-Day SMA	75.22

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E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for Procter & Gamble is close to the industry average of 0.50.

	Debt-To-Equity	Cash	Long-Term Debt
PG	0.47	5.88B	32.22B
JNJ	0.24	21.67B	15.89B
KMB	1.41	1.11B	7.03B

E = Earnings Have Been Steady

Earnings haven’t consistently grown on an annual basis, but they have been steady within a range.

Fiscal Year	2008	2009	2010	2011	2012
Revenue ($) in millions	83,503	79,029	78,938	82,559	83,680
Diluted EPS ($)	3.64	4.26	4.11	3.93	3.66

Looking at the last quarter on a year-over-year basis, revenue and earnings both improved.

Quarter	Mar. 31, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2013
Revenue ($) in millions	20,194	20,212	20,739	22,175	20,598
Diluted EPS ($)	0.82	1.24	0.96	1.39	0.88

Now let's take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

Conclusion

Procter & Gamble might be dealing with several headwinds at the moment, but this is a company that has survived many storms in the past. With a strong management in place and clear-cut goals that are likely to be effective, Procter & Gamble should remain a long-term winner.