The Proctor and Gamble Company

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The Proctor and Gamble Company
Michael T Nugent McIntire Investment Institute
17 March 2008
Ticker Symbol PG Listed On NYSE
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Agenda

• Corporate Profile
• - Background, Key Statistics, Stock Chart
• Thesis Points
• - Resilience in Downturns, Growth Opportunities,
  Management, Current Price
  
• Risks
• VAR
• Questions

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Profile Background

• Founded in 1837 in Cincinnati, OH sold soap and
  candles
  
• Manufactures and markets non-durable household
  products
  
• Competes in seven business segments
• 300 heavily branded products
• Operations all over the world
• A number of smaller competitors

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Profile Key Statistics

• Market Cap 204.19 billion
• P/E (ttm) 20.4
• P/E (industry) 19.3
• PEG 1.44
• Avg Volume (3 month) 12.375 million
• EPS (ttm) 3.305

• 1 yr target price 78.31
• Sales 76.476 billion
• Net Inc 10.3 billion
• CFO 13.4 billion
• Debt / Equity 1.07
• Dividend Yield 2.1

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Profile Stock Chart

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Thesis Point A Resilience in Adverse Market
Conditions

• The inherent nature of Proctor and Gambles
  product offerings
  
• - Basic goods great market share
• A diverse portfolio of brands and markets
• - Broad range of products with different
  margins geographic sales are spread out
  
• Balance sheet strength for uncertain times
• - Low debt and ability to pay it off

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Investing Fundamental

• Interest Coverage Ratio
• Earnings before interest and taxes (EBIT)
• Interest expense
• Measures the ease with which a firm can meet
  interest payments on outstanding debt.
  

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Thesis Point B Growth Opportunities

• Utilization of internal and external R D
• - Spending and synergies Connect Develop
• Entry of higher margin products into new markets
• Strategic acquisitions of competitors
• Organic sales growth evenly distributed across
  business segments
  

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Thesis Point C Management Expertise

• CEO Allen George Lafley
• - Credited with causing PGs major turnaround
  from their 2000 nadir
  
• Internal management training programs
• - General Manager College and Executive
  Leadership Program

A.G. Lafley, CEO
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Thesis Point D Favorable Pricing

• Difficult to gain an edge on a firm as massive as
  PG
  
• Closing price on March 17th, 2008 67.48
• The Folgers divestiture in January 2008 was a
  smart move by PG, despite the reaction of the
  market.
  
• - Weak retail coffee sales and competition from
  better on-the-go providers
  

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PG Stock Chart
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Risks

• Rising prices of raw materials invite
  competition
  
• Retained vulnerability to unfavorable economic
  conditions
  
• Unfavorable exchange rates
• - Currently working in PGs favor
• Future divestitures of 1 billion brands
• - Pringles or Duracell

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Value Added Research

• Human Resource Executive Magazines Managing
  Editor Kristen Frasch
  
• - PG recognized for HR advantages
• Accounting Professor at UVA Patrick Wilkie
• - Dual nature of large cash flows from
  operations
  
• - Price fluctuation insurance with financial
  derivatives
  

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Value Added Research

• Director of Inventory Management for Wal-Mart
  Superstore in Crystal Lake, IL Mike Brohmly
  
• Fragrance Sales Specialists
• - Kathy at Nordstrom in Norfolk, VA
• - Deborah at Macys in Beverly Hills, CA

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Summary

• PG presents a reliable choice in a downturn
• Growth opportunities exist
• Competent and well-trained management
• Current pricing opportunity

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Questions, Comments, Criticisms?