Just when you think you've figured out what's going to happen next, the writers throw in a new plot twist to the plot.
PG and its future prospects don't seem to get the respect they deserve. And just when you think you've heard it all...
We recently learned that PG's former CEO, Bob McDonald, received compensation during his final full year at the world's largest consumer products maker of nearly $16 million, up 5% from the last year.
Then McDonald's retirement was suddenly announced in May as PG was under the gun to improve its bottom-line results. He was replaced by his predecessor, A.G. Lafley, who was given a prorated compensation deal of $2 million for the five weeks he served at the end of the company's fiscal year, according to a filing with the Securities and Exchange Commission.
But who cares when P&G, Colgate and European-based
are seeing their shares sold off like bad apples? PG shares recently plunged to $77.33 before recovering a bit to around $78.
Yet, PG is still selling at a rich multiple. Shares have dropped 3.5% since the intraday high on my birthday, Aug. 21, (it feels so good to be 39 once again, but I digress). PG's PE ratio is still around 20. Below $78 a share the relative strength index (RSI) dips below 30, a technical oversold sign as well.
Investors wonder why PG's pint-size rival, Colgate-Palmolive, is afforded a current PE ratio of over 24 while PG only trades at slightly more than a PE of 20. PG, with a market cap of over $215 billion offers investors a current dividend yield-to-price of over 3%.
CL's market cap weighs in at around $54 billion and its current $1.36 annual dividend equates to a yield of only 2.34% when the price is at $58.22. Even when looking at the future (one-year) PE, CL sports almost a 19 and PG gets slightly less than 17. UN has a $109 billion market cap at a PE of 18.
Comparing "apples to apples" with these three companies is challenging. Investors want to see earnings per share (EPS), revenue growth, and healthy margins. So let's see a one-year chart of each, starting with PG.
Well, PG is experiencing a tough time in the diluted, quarterly and year-over-year EPS growth department. Its trailing 12-month (TTM) revenue per share is looking up though. Now let's peak at the CL chart.
After dipping like a concrete donut at the beginning of 2013, CL's diluted quarterly, year-over-year EPS is heading in the right direction. So is its TTM revenue per share. Of the two charts and the two companies stocks I favor CL's and so does the market for the time being.
PG is working hard to expand into growing emerging markets such as Latin America, India and Russia. But it's faced tough competition from already entrenched smaller rivals including Unilever and Colgate-Palmolive. Below is the one-year chart for UN. Revenue (TTM) has fallen.
So if I were to put my money to work at the moment in the consumer goods sector I'm beginning to lean towards UN. With the price per share below $39 it offers a dividend yield-to-price of 3.64% and a current PE ratio of around 18. When it comes to revenue the company has a potent plan in place.
Unilever has publicly stated this summer, "Our ambition is to double the size of our business, whilst reducing our overall environmental footprint (including sourcing, consumer use and disposal) and increasing our positive social impact." That fits well with my environmentally sensitive conscience.
Unilever announced on Aug. 12 that it signed an agreement for the sale of its Wish-Bone and Western dressings brands to
for a total cash consideration of about $580 million, subject to regulatory approval.
Kees Kruythoff, president of Unilever North America, said: "Wish-Bone is an iconic brand and the number-one Italian dressings brand in the U.S. We believe that the potential of both the Wish-Bone and Western brands can now be more fully realized with Pinnacle Foods."
My conclusion is that obviously these three superstars of the consumer goods sector are in "mark-down mode" and it's possible all three may test the June 24 lows when PG touched $75.63. That same day CL bottomed at $55.47 and UN cratered at $37.55. Personally, those would be my buy targets.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.
Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.
In his role as a financial editor, he specializes in unique investment strategies, overlooked stock investments, energy and resource companies, precious metals, emerging growth companies, the prudent use of option strategies,real estate related opportunities,wealth preservation, money-saving offers, risk management, tax issues, as well as "the psychology of investing". Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the ¿herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.