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The Procter & Gamble Company (NYSE:PG) Experiencing Fast Growth, But is There Further Upside?

The Procter & Gamble Company (NYSE:PG) shares have been experiencing accelerated earnings and sales growth over the past five years.  Over that time frame the firm has seen earnings growth of 1.50% and sales growth of -3.60%.

As we move deeper into earnings season, investors and analysts will be closely watching which companies look they are getting things right. Many investors will be following which companies beat or miss the estimates by a wide margin. Large surprise factors can cause a stock to jump or fall shortly after the actual numbers are released. Investors may also be tracking which industry leaders come out on top during the latest round of earnings reports. Tracking the sectors that are poised for growth may help give the investor a good idea for the types of stocks they may want to add to the portfolio as we get closer to the end of the current calendar year.

While the firm has enjoyed the upward movement, it’s important to look at analyst expectations and where the company is headed from here.  On a consensus basis, analysts are projecting EPS growth of 6.63% for next year and have a $123.62 one year price target on the stock.   The stock recently traded at $117.59.

 Six Fundamental Characteristics of Great Growth Stocks

#6 Huge Mass Markets – The more potential customers there are, the greater the possibility that both the company, and the investment in said company, will be a success. 

#5 Market Dominance/Barriers to Entry – Look for companies who hold patents.  This is great barrier to entry, ensuring no competition.  Look for companies who dominate the market, blowing away the competition, though market dominance can be harder to measure. 

#4 Accelerating Earnings Growth – If a company’s earnings growth rate increases for two consecutive quarters, their growth is accelerating.  Faster growth is better growth, and a company whose earnings growth rate is accelerating is an attractive investment.

#3 Triple-Digit Revenue Growth – Companies growing their revenues at triple-digit rates (100% or better) are usually smaller and less known, making them attractive for buying by institutions. 

#2 High Profit Margins – In recent decades, high-margin stocks have beaten low-margin stocks by a huge amount. 

#1 Top Notch, Innovative Management – All great managers who led their companies to success usually did so by thinking differently.  There is no surefire and quick measurement of management talent.  When you find a top manager, one with a record of prior success and accolades, you should strike.  Top managers usually find a way to overcome obstacles. 

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RECENT PERFORMANCE

Let’s take a look at how the stock has been performing recently.  Over the past twelve months, The Procter & Gamble Company (NYSE:PG)‘s stock was 27.76%.  Over the last week of the month, it was 0.61%, 12.66% over the last quarter, and  20.90% for the past six months. 

Earnings Per Share (EPS):

EPS is what each share is worth and indicates how much money their sharehoders would acquire if the company was to pay out all of its profits.  Earnings Per Share is computed by dividing the profit total by its share total.  If a company’s profit is $800 million and there are 40 million shares, then the EPS is $20.  EPS is a fantastic way to compare and contrast companies in the same industry.  When a company shows a steady upwards earnings trend, it is a good indicator that the company will dominate companies with a more volatile earnings trend. The Procter & Gamble Company (NYSE:PG)’s EPS is 4.11.  Last year, their EPS growth was 5.60% while their EPS growth over the past five years is 1.50%.  Analysts are predicting The Procter & Gamble Company’s stock to grow 6.63% over the next year and 7.26% over the next five.

Many investors enter the stock market without a plan in place. Investment goals may be a highly important part of coming out on top. Investors may need to set realistic and measureable goals in order to build a baseline for success. Defining investment goals clearly can help keep individual investors from making common mistakes and losing their shirts. Creating a plan for entering the equity market may start by setting up goals and outlining the objectives of the individual. These goals can differ depending on the person and situation. Many investors will opt to follow strategies put in place by others. This may work fine for some, but not as well for others. Keeping a close eye on particular stocks in the portfolio may help the investor when the time comes to adjust the holdings. Being able to adapt to rapidly changing market environments may turn out to be immensely important when the winds of uncertainty blow in.
 
Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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