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%.
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%
Tragically most retailers still think in
percentages. "I make 26% on that item...yours only brings me
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.
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.
"they reward sales PEOPLE"
The ol' I'm the
hub of the universe argument. Heard it, been there,
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.
companies that provide products that meet thier needs at a
price they are willing to pay eg. value.
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
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
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.
but one example of poor point-of-sale work.
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
Advertising won't do it.
What's the status of the
sales force now??
I'd like to know about that in
Retired now..but still VERY
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 $300,000/week and don't get coverage because "we
can do it with advertising". Bad shelf presence, bad
distribution, and little merchandising. Buyers do not reward
Companies, they reward sales PEOPLE!! Cincinnati is top
heavy with Proctoids who generate little if anything
The fundamental value of a
stock is equal to the net present value of total
shareholder return. Dividends plus price growth.
actual share price on a given day is a function of NPV
+- the aggragate investor's perception of NPV. eg.
Where do you get the assumption that expected growth is
7%. P&G annual earnings growth has been over 15% for
the last 40 years. In the long run share price is
directly proportiona to earnings growth.
I agree that 7% is the "worst case gloomiest
scenario" considering the introduction of new products in
the market and other initiatives.
The value of
the stock at 60$ 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
"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
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.
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
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.
discounted dividend model is valid. Other fundamental
factors must be factored in with P&G.
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.
simply cannot build a business on the back of cost
P&G sales people must turn in better
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
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
Across the company there
simply must be a sales drive like none they have ever
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.
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
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.