The Procter & Gamble Company: Strengths, Weaknesses, Opportunities, Threats
Ryan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is a tremendous way to gain a detailed and thorough perspective on a company and its future. Fresh off of the first quarter earnings report, which was a beat and sent the stock to 4-year highs, I would like to focus on the personal and household products giant Procter & Gamble (NYSE: PG).
- The company is valued at $191.47 billion on the market, sells products in more than 180 countries, and is not going away any time soon
- The company’s broad portfolio of brands includes Crest, Olay, Old Spice, Downy, Puffs, and Pampers, with 25 brands being billion dollar brands
- Many of P&G’s products are considered non-cyclical, such as diapers or toothpaste, and have to be purchased no matter the economic environment
- The company currently pays out quarterly dividends of $0.56, which annualized yields 3.24%, and the company has a long and proven track record of consistently paying out and raising dividends since 1987
- Sales growth is very stable and predictable, and is projected to be in the mid to high single digit range for the upcoming years
- Consumers have consistently proven over and over again that they are willing to pay a little more for a brand name
- The company’s business does not benefit substantially from pickups in the economy, due to the necessity label that is given to the majority of P&G’s products
- The company’s products are already available in nearly every country in the world, so there is not much room left to grow for the company, so P&G must rely on growing populations
- The stock carries a price to earnings ratio of 22.66, making the stock appear extremely pricy as the company only possesses single digit growth
- While this is can be a strength for a long-term investors, the stock’s volatility is minimal with a Beta ratio of only 0.44
- The company faces incredible amounts of competition in all the sectors it operates in
- An acquisition of a brand from another company is always possible and may fuel future growth
- The exponential growth of the middle class in emerging markets such as China and India should act as a growth catalyst as more and more people there purchase more and more products
- Because P&G sells items such as toothpaste and diapers it benefits if there is more people to purchase their items, and as world population is only set to grow into the future, P&G should have more customers into the future
- Capturing market share from competitors through advertising campaigns is always a possibility
- Competition is always an ever-prevalent threat to the success of any company
Major publically-traded competitors include Colgate-Palmolive (NYSE: CL) and Church & Dwight (NYSE: CHD). Colgate-Palmolive, like P&G is highly diversified, and competes with P&G in the toothpaste market, however also competes with P&G in the personal care market and pet food market. Church & Dwight is a much smaller company than the other two, but is a major player in the personal care and household goods markets.
- Fierce competition to offer the best-product at the lowest price has proven detrimental to margins in all industries
- P&G can be described as a wide-moat company, as it has built a strong defense around its business, and for any company to even come close to equaling P&G’s distinguished and famous brands with the incredible distribution system the company has built, it would take a lot of time and money, and therefore there are not a lot of threats that actually could harm P&G’s business
makinmoney2424 has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend The Procter & Gamble Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.