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Facts of growth in the value of shares.
Over the past four years, revenue has remained virtually unchanged. The company’s products are found all over the world (over 180 countries). Moreover, the company operates in a sector in which profits can be called acyclic – the population in any case will spend money on washing powders, toothpastes and other essential goods, regardless of the depth of the crisis. The company’s shares are traded at $ 128 – about the same as at the beginning of the year ($ 124). The main sales markets for the company are North America (45% of production) and Europe (23% of production). The company’s competitors are typical manufacturers of household chemicals and personal care products – Colgate, Mars, Unliver. However, many #PG products (always, bounty, crest, gillette, oral-b, tide, venus, etc.) have the largest market share in their category in the US. The company seriously intends to expand on world markets – the #PG management chose the Asian regions as the main area for expansion, which now account for about 10% of the company’s net profit. The company also seeks to expand the sale of goods in Russia and Brazil.
Investors generally like this company because of its stability – the company is a dividend aristocrat, that is, it has been paying dividends for more than 25 years without reducing their size. Also, as I noted earlier, the company’s revenues are mostly cyclical – we will not see a large drop in revenues or net income during the crisis. Thus, it can be said that the company is a defensive asset. Moreover, ahead of the report, investors are optimistic about the paper due to increased sales of cleaning products, paper towels and other goods for which demand increased during the pandemic. Also, the operating margin remains at a level higher than that of competitors.
Our verdict regarding the company
It is clear that the company’s growing sales figures for some products are due to the current situation in the world (coronavirus). However, can we say that the company’s revenue will fall markedly if demand for some of its products returns to normal levels? I think not. The company will still remain the leader in the consumer products industry and will continue to expand globally. Therefore, the price of $ 120-130 quite adequately represents the company’s position in the industry.
The trailing P / E multiplier of 69 may seem large enough, but this value is due to low net profit in 2019. Forward P / E of 25 adequately shows the current state of the company.
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