Question

In this examination, the company that I have selected is P&G which is Procter & Gamble. This company has a total rating of 2.7 out of 5 and has a ‘hold’ recommendation by the analysts covering this company. So, after analyzing the company’s annual report for the fiscal year 2018 (for the period ending June 30, 2018) I came across two significant information disclosures that support the hold rating by the analysts. These disclosures are: One, the company’s organic growth will be around 2% to 3% in the future and this will be at average with the industry growth rate. And two, the company will continue to have a higher growth rate in markets like China and India and this will be the norm for other companies in the industry. Growth for P&G will remain muted and subdued in North America and Europe and this will be the case for its competitors as well. Due to this information disclosed in the company’s annual report one can see that the upside in P&G’s stock will be limited.

My question is, how can I measure my results to the performance of other companies in the industry? How would P&G look when we compare it to other companies in the industry or to the industry average itself?

Answer 1

Other companies in the industry are companies like Johnson and Johnson (J&J), Colgate-Palmolive (CL), Avon Products (AVP) etc.

When comparing the performance of P&G with that of the performance of the industry and other players in the industry we can see that performance of P&G is in line with the performance of the industry and other companies (which are key competitors of P&G) in the industry.

Take for example Colgate-Palmolive. The company also has a total rating of 2.7 out of 5 and has a ‘hold’ recommendation by the analysts covering this company. On the other hand J&J has a lightly better rating of 2.4 but it still is in between ‘buy’ and ‘hold’ recommendation. Same is the case with Avon Products which has a rating of 2.5 and is in between ‘buy’ and ‘hold’ recommendation.

Thus we can see that even though P&G has a hold rating its performance is in line with the industry performance and it has not underperformed when compared to the industry. So when compared to other companies in the industry or to the industry average itself the performance of P&G is at par, though not above average performance which outperforms the industry and the competition.

https://finance.yahoo.com/quote/CL?p=CL&.tsrc=fin-srch (link for Colgate Palmolive)

https://finance.yahoo.com/quote/JNJ?p=JNJ&.tsrc=fin-srch (link for Johnson and Johnson)

https://finance.yahoo.com/quote/AVP?p=AVP&.tsrc=fin-srch (link for Avon Products)