2 Reasons to Like PG and 1 to Stay Skeptical

May 30, 2025 at 00:01 AM EDT

PG Cover Image

Procter & Gamble has followed the market’s trajectory closely. The stock is down 6.2% to $168.47 per share over the past six months while the S&P 500 has lost 2.2%. This may have investors wondering how to approach the situation.

Following the drawdown, is now an opportune time to buy PG? Find out in our full research report, it’s free.

Why Does Procter & Gamble Spark Debate?

Founded by candle maker William Procter and soap maker James Gamble, Proctor & Gamble (NYSE: PG) is a consumer products behemoth whose product portfolio spans everything from facial tissues to laundry detergent to feminine care to men’s grooming.

Two Positive Attributes:

1. Operating Margin Reveals a Well-Run Organization

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Procter & Gamble has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer staples business, boasting an average operating margin of 25.2%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Procter & Gamble Trailing 12-Month Operating Margin (GAAP)

2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Procter & Gamble has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 18.6% over the last two years.

Procter & Gamble Trailing 12-Month Free Cash Flow Margin

One Reason to be Careful:

Sales Volumes Stall, Demand Waning

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Procter & Gamble’s quarterly sales volumes have, on average, stayed about the same over the last two years. This stability is normal because the quantity demanded for consumer staples products typically doesn’t see much volatility. Procter & Gamble Year-On-Year Volume Growth

Final Judgment

Procter & Gamble has huge potential even though it has some open questions. With the recent decline, the stock trades at 23.6× forward P/E (or $168.47 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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