In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.
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Procter & Gamble Co. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
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Intrinsic Stock Value (Valuation Summary)
Year | Value | DPSt or Terminal value (TVt) | Calculation | Present value at |
---|---|---|---|---|
0 | DPS01 | |||
1 | DPS1 | = × (1 + ) | ||
2 | DPS2 | = × (1 + ) | ||
3 | DPS3 | = × (1 + ) | ||
4 | DPS4 | = × (1 + ) | ||
5 | DPS5 | = × (1 + ) | ||
5 | Terminal value (TV5) | = × (1 + ) ÷ ( – ) | ||
Intrinsic value of Procter & Gamble Co. common stock (per share) | ||||
Current share price |
Based on: 10-K (reporting date: 2024-06-30).
1 DPS0 = Sum of the last year dividends per share of Procter & Gamble Co. common stock. See details »
Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.
Required Rate of Return (r)
Assumptions | ||
Rate of return on LT Treasury Composite1 | RF | |
Expected rate of return on market portfolio2 | E(RM) | |
Systematic risk of Procter & Gamble Co. common stock | βPG | |
Required rate of return on Procter & Gamble Co. common stock3 | rPG |
1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).
3 rPG = RF + βPG [E(RM) – RF]
= + [ – ]
=
Dividend Growth Rate (g)
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
2024 Calculations
1 Retention rate = (Net earnings attributable to Procter & Gamble (P&G) – Dividends and dividend equivalents, common – Dividends and dividend equivalents, preferred) ÷ (Net earnings attributable to Procter & Gamble (P&G) – Dividends and dividend equivalents, preferred)
= ( – – ) ÷ ( – )
=
2 Profit margin = 100 × (Net earnings attributable to Procter & Gamble (P&G) – Dividends and dividend equivalents, preferred) ÷ Net sales
= 100 × ( – ) ÷
=
3 Asset turnover = Net sales ÷ Total assets
= ÷
=
4 Financial leverage = Total assets ÷ Shareholders’ equity attributable to Procter & Gamble
= ÷
=
5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × ×
=
Dividend growth rate (g) implied by Gordon growth model
g = 100 × (P0 × r – D0) ÷ (P0 + D0)
= 100 × ( × – ) ÷ ( + )
=
where:
P0 = current price of share of Procter & Gamble Co. common stock
D0 = the last year dividends per share of Procter & Gamble Co. common stock
r = required rate of return on Procter & Gamble Co. common stock
Year | Value | gt |
---|---|---|
1 | g1 | |
2 | g2 | |
3 | g3 | |
4 | g4 | |
5 and thereafter | g5 |
where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5
Calculations
g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= + ( – ) × (2 – 1) ÷ (5 – 1)
=
g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= + ( – ) × (3 – 1) ÷ (5 – 1)
=
g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= + ( – ) × (4 – 1) ÷ (5 – 1)
=