As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently on our screens, Procter & Gamble Co ().
ProfileSince its founding in 1837, Procter & Gamble has become one of the world’s largest consumer product manufacturers, generating more than $80 billion in annual sales. It operates with a lineup of leading brands, including more than 20 that generate north of $1 billion each in annual global sales, such as Tide laundry detergent, Charmin toilet paper, Pantene shampoo, and Pampers diapers. Sales outside its home turf represent more than half of the firm’s consolidated total.
Recent PerformanceOver the past twelve months, the share price is up 15.53%.Source: Google FinanceInputs
Forecasted Free Cash Flows (FCFs)
Terminal ValueTerminal Value = FCF * (1 + g) / (r – g) = 671.56 billionPresent Value of Terminal ValuePV of Terminal Value = Terminal Value / (1 + WACC)^5 = 501.83 billionPresent Value of Free Cash FlowsPresent Value of FCFs = ∑ (FCF / (1 + r)^n) = 75.42 billionEnterprise ValueEnterprise Value = Present Value of FCFs + Present Value of Terminal Value = 577.25 billionNet DebtNet Debt = Total Debt – Total Cash = 25.15 billionEquity ValueEquity Value = Enterprise Value – Net Debt = 552.10 billionPer-Share DCF ValuePer-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $234.94
Conclusion
Based on the DCF valuation, the stock is undervalued. The DCF value of $234.94 share is higher than the current market price of $171.28. The Margin of Safety is 27.10%.More By This Author:
