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The Procter & Gamble Company Message Board

  • gabe2010 gabe2010 Apr 26, 2000 7:52 PM Flag

    FUNDAMENTAL VALUE OF PG - READ NOW

    The fundamental value of a stock is equal to the
    sum of all its discounted dividends over time, i.e.
    1,28$ + 1,28 plus dividend growth +++. The present
    traded value of PG at 60.75$ equates to a dividend
    growth rate of 7%/p.a.

    The present rate of
    return of PG is roughly the sum of its dividend yield of
    2% and the long term expected growth per year of 7 %
    for a total of 9 % p.a. If PG succeeds in boosting
    this growth rate thru its various initiatives, to say
    12%, the stock will rebound by over 50%.

    In
    the present market valuation of PG, no credit value
    whatsoever is give to the potential of those initiatives.
    Yet we agree it is the only way to pull the stock up.
    This is where the speculation lies, on top of the 9%
    guaranteed return, i.e. 9% + 50% = 59%

    So
    LONG.
    Gabe

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Tragically most retailers still think in
      percentages. "I make 26% on that item...yours only brings me
      12%"

      Most of the time the 26% return product equates to "a
      slow dime" while the 12% product returns real rapid
      nickels. A trickle of 26% product doesn't bring in the
      profit DOLLARS of a torrent of 12% items.

      When I
      go to the store they always want money...they never
      have taken percentages.

      You are right about
      explaining shelf placement...the retailer will try to get
      the consumer to buy what the retailer wants to
      sell....the shopper will continue to buy what the shopper
      wants to buy.

    • however my experience has been that Walmart,
      Lowes and Home Depot are a lot more inclined to put
      your product in if you approach them with a
      merchandizing plan, rack, PDQ tray etc. Those buyers don't
      spend a whole lot of time figuring out how to
      merchandize your products. You have to do it for them. As a
      vendor I make sure I have it done for them and that gets
      my products placement.

    • Which product makes the most money for the retailer?

      I can't answer this question, but I bet anything it explains shelf placement.

    • "they reward sales PEOPLE"

      The ol' I'm the
      hub of the universe argument. Heard it, been there,
      done it.

      What to you mean by "buyers"? Trade
      Customers or consumers.

      Trade customers (retail
      outlets) reward companies who provide products that make
      them money. Directly through margins or indirectly
      through increased store traffic.

      Consumers reward
      companies that provide products that meet thier needs at a
      price they are willing to pay eg. value.

      The
      role of the sales rep has changed. It used to be that
      the rep would work with the store owner and help
      him/her merchandise the product in a way that supposedly
      maximized profit. Ad space planning, planograms, promotion
      planning and all that. The theory was that the rep doesn't
      really sell. He/she adds value for the trade
      customer.

      Two problems with this model:

      1. It's a zero
      sum game. The P&G rep would make a great presentation
      and so would every other rep from other companies.
      Every presentation provides a compelling argument why
      their products should be promoted and placed better
      than others. Lose-lose. Even promotions and coupons
      only serve to time-shift the business. You create
      artificial demand one month due to reduced prices followed
      by slower demand the next month as the consumer used
      up the stored product.

      2. Store owners are
      alot smarter now. Most of the volume flows through
      major outlets Win-Dixie, Sam's, Costco, Wal-Mart,
      Piggly-Wiggly. These retailers already know how to mercandise
      and promote products to maximize profit. Since they
      are looking at the big picture of total store volume,
      they are in a better situation to know what's best for
      them. Try going into a Wal-Mart or Sam's and tell them
      how to place product. It's a waste of
      time.

      The world of retailing has changed and will continue
      to change. Everyone, including Sales, needs to
      anticipate the changes and adapt roles to fit.

    • Just as I said a few days ago....IVORY Soap is on
      the absolute bottom shelf. I have seen it in St.
      Louis (Schnucks), Central Florida, South Carolina and
      North Carolina. And, regrettably, I have seen it on the
      bottom shelf for years.

      DIAL and LEVER are
      trouncing PG in the bar soap business...Wathc DIAL get
      COAST up where the shopper can get it.

      This is
      but one example of poor point-of-sale work.

      I
      was a Section Salesman, Office Head Salesman and Unit
      Manager for PG and distribution and product location is
      the key merchandising objective for any type product
      in a store of any type (grocery or
      non-grocery)

      Advertising won't do it.

      What's the status of the
      sales force now??
      I'd like to know about that in
      factual terms.

      Retired now..but still VERY
      interested

    • It starts with the products being in distribution and only gets better when they are positioned correctly.This area has been ignored and it is low hanging fruit waiting to be harvested!

    • Sales reps can mean 10% increase in the business.
      Sometimes more. 10% doesn't always sound like much but lose
      10%/year and it adds up. A rep can make a big difference.
      If you don't believe it just look at stores doing
      about $300,000/week and don't get coverage because "we
      can do it with advertising". Bad shelf presence, bad
      distribution, and little merchandising. Buyers do not reward
      Companies, they reward sales PEOPLE!! Cincinnati is top
      heavy with Proctoids who generate little if anything
      valuable.

    • Actually...

      The fundamental value of a
      stock is equal to the net present value of total
      shareholder return. Dividends plus price growth.

      The
      actual share price on a given day is a function of NPV
      +- the aggragate investor's perception of NPV. eg.
      speculation.

      Where do you get the assumption that expected growth is
      7%. P&G annual earnings growth has been over 15% for
      the last 40 years. In the long run share price is
      directly proportiona to earnings growth.

      • 1 Reply to CV_44
      • I agree that 7% is the "worst case gloomiest
        scenario" considering the introduction of new products in
        the market and other initiatives.

        The value of
        the stock at 60$ is presently equal to the present
        value of all dividends if you take a 7% dividend growth
        per year. In other words, the 7% is the market
        perceived growth rate. We mean the same.

    • Very good, now when you get out of financeI you
      will learn that the capm and dd don't mean squat
      unless you can predict the future and have the stomach
      to sit around waiting for it. (which you can't and
      won't)

      "9% guaranteed return", gimmie a break,
      nothing is guaranteed, no company grows perpetually, and
      dividend rate doesn't mean squat. Div is just what's left
      of your money after they blow the rest financing
      stupid web sites like refucked.com, I mean reject.com, I
      mean reflect.com. If they decided to raise the
      dividend would the stock be worth more? If you think so,
      send me 60 dollars and I'll send you back
      $1.29!

      Speculate all you want, but please stop butchering your
      poor finance professor's work. Models are just that,
      models. They are a way to describe the way the market
      might or should work, not the way it does.

      All
      that being said, you are right, this stock is
      undervalued and the market is stupid. Problem is, when it
      comes time to cash in, that stupid market is going to
      tell you how much you'll get, regardless of what your
      model says.

    • Lots of "wishing" here. Getting to 70 seems to be
      a major goal for some. There's more than that to
      righting this ship.

      It's not sinking.

      The
      discounted dividend model is valid. Other fundamental
      factors must be factored in with P&G.

      Their
      problems are slow unit volume growth at a profit. Other
      ancillary problems are lack of confidence on the part of
      the analysts. They currently are spooked (and upset,
      big-time) by how management described how they were going
      to finish off the year. (Fiscal year ends on last
      day of June). Management sez nothing about increased
      volumes and increased margins but says retiree benefits
      ets. will allow meeting lowered targets.

      You
      simply cannot build a business on the back of cost
      cutting.

      P&G sales people must turn in better
      numbers.

      Homely example: IVORY SOAP is on the bottom shelf of
      your supermarket. This is the worst possible retgial
      location especially for a small size product. Lever and
      Dial have the hip to shoulder shelf position. That's
      the hot area for retail...make it easy to
      buy.

      Without spending another markeyting or merchandising
      dollar just getting IVORY up where DIAL is would
      generate about 6-8% more business. That may seem to be
      small but 8% one month's business over a year. With
      IVORY soap's volume another 8% without additional
      spending would start to make a difference on the top line
      (revenue) and the bottom line topo.

      There are other
      retail opportunities in the case goods business that can
      be implemented.

      Across the company there
      simply must be a sales drive like none they have ever
      had.

      Grant attractive 3-year options to the sales force..the
      guys amd gals at the bottome..as well as their bosses.
      Price the options at an average of the past 30 day's
      closing prices. Generate enthusiasm.reward results..get
      the boat moving.

      How many stores in your area
      have IVORY on the bottom shelf. It would be
      interesting to know.

      Pardon the DOG's typos please.

      • 2 Replies to easydog73
      • Putting Ivory soap at hip level is a good idea
        but will generate very little volume or profit. P&G's
        current management thinks sales (or is it CBD) are a
        necessary evil. Over the last 4 years they think sales is
        less necessary. Could be that is why our volume is not
        growing as fast as the advertising weenies think it
        should. Bad copy is not the reason for lower volume - it
        is poor placement, poor distribution and poor
        merchandising. Why is it poor? Because there are few if any
        stores being called in by competent, P&G sales people.
        Part time people cannot get the job done. We have
        people making decision based solely on cutting cost
        instead of driving sales. Most people are moved along by
        sponsor's instead of performance. We need to concentrate on
        putting people, full time, well trained people (sales
        people) in the field and stop filling cubicles in
        Cincinnati with sponsored pencil pushers. All these duds do
        is create worth that does not create volume. Jager
        is creating a top heavy organization that will have
        trouble increasing the business.

      • I have noticed a substantial increase in
        visibility of PG products in many departement stores, in the
        center shelves and on promotion. I am sure the sales
        people are making a difference now as employees and
        shareholders.

        Although I have not read the "initiative 2000" program but
        I would believe : 1) this move has been prepared by
        veterans and thoroughly reviewed and approved, and 2) its
        benefits outweight its cost.

        PG moved from 118 to
        88 to 54, bumped to 72 and fell again to 60. It
        might flucutate between 60 and 70 until the proof of
        the benefits of initiative 2000 are shown.

 
PG
81.16-0.45(-0.55%)Jul 11 4:00 PMEDT

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