Procter & Gamble Co (PG) DCF Valuation: Is The Stock Undervalued?

Johnny HopkinsStock ScreenerLeave a Comment

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 currently in our screens, Procter & Gamble Co (PG).


Since 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. P&G sold its last remaining food brand, Pringles, to Kellogg in calendar 2012. Sales outside its home turf represent just more than half of the firm’s consolidated total.

Recent Performance

Over the past twelve months the share price is up 12.74%.

PG Chart

PG data by YCharts


  • Discount Rate: 6.0%
  • Terminal Growth Rate: 2%
  • WACC: 6.0%

Forecasted Free Cash Flows (FCFs)

Year FCF (billions) PV(billions)
2024 15.76 14.87
2025 16.5 14.68
2026 17.28 14.51
2027 18.1 14.34
2028 18.95 14.16

Terminal Value

Terminal Value = FCF * (1 + g) / (r – g) = 483.23 billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 361.09 billion

Present Value of Free Cash Flows

Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 72.56 billion

Enterprise Value

Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 433.65 billion

Net Debt

Net Debt = Total Debt – Total Cash = 26.36 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 407.29 billion

Per-Share DCF Value

Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $172.73


DCF Value Current Price Margin of Safety
$172.73 $157.02 9.09%

Based on the DCF valuation, the stock is undervalued. The DCF value of $172.73 per share is higher than the current market price of $157.02. The Margin of Safety is 9.09%.

It is important to note that this valuation is based on a number of assumptions, and these assumptions could change in the future. This valuation is meant to be a back-of-the-envelope analyse that could be used as a starting point in a much more thorough valuation process. As a result, it is important to do your own research before making any investment decision.

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