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Procter & Gamble Co: PG Stock Is Becoming a “Buy” Again

For the first time in a long time Procter & Gamble is hitting homeruns

Calling a spade a spade, the last three years haven’t exactly been thrilling ones for owners of Procter & Gamble Co (PG). Even with the 27% gain from August’s low, PG stock is still valued right where it was in April 2015, May 2014 and even as far back as the highs from early 2013.

Procter & Gamble Co: PG Stock Is Becoming a "Buy" Again

For perspective, the S&P 500 is up 31% from May of 2013. Of course, no lamentation of a disappointing performance from PG is complete without also explaining how the once-iconic company has simply struggled to do well of late.

Last year’s top line of $76.3 billion and bottom line of $8.5 billion were both far cries from the $83.7 billion and $8.9 billion, respectively, Procter & Gamble generated in 2012.

To be fair, the company has been shedding some of its brands, reducing its capacity to drive sales and profits. For instance, it sold a big piece of its beauty business to rival Coty Inc (COTY) in the middle of last year, culling $5.9 billion worth of revenue. Still, throwing in the towel on a venture — even a failing one — is anything but inspirational.

Then again, P&G has been in a defensive mode for a while now; shedding business lines it couldn’t do well with seems to be the new norm … until now.

Not that a couple of successful new products are enough to turn the enormous ship around, but for the first time in a long time, the current Procter & Gamble looks like a little like the old Procter & Gamble, in all its glory. PG stock may actually be growing back into a buy-worthy name again.

Signs of Life for PG Stock

In the 80’s and 90’s, Procter & Gamble could do no wrong. However, there’s only so much you can do with detergent and diapers before you run low on ideas and competition catches up. With its edge becoming dull a decade ago, P&G has struggled to remain the name to beat.

This year, however, the old Procter & Gamble mojo is back.

Two new products underscore this idea … Tide Pods, and the Gillette Fusion razor. Neither are all new products, but both have been innovative enough since their post-2000 unveiling that each now tops $1 billion in annual revenue. A third product, Pampers Swaddlers, will also soon hit that milestone.

On the surface, such a figure may seem trivial. After all, Procter & Gamble has generated $71.3 billion worth of revenue over the course of the last four quarters. Surely, several of them drive sales in excess of a billion dollars per year.

That’s just it though — most of them don’t, but at least some of them (more of them) should be. Now, for the first time in many years, some of them are. That is, they’re acting as the core brands that will carry the bulk of the weight for the proverbial future, allowing the company to add nickels and dimes to those dollars along the way.

Older investors will know it as “the way it used to be.”

Thank David Taylor for the Procter & Gamble Comeback

Current and would-be investors of PG stock should know that it’s not just a stroke of luck that pushed the Fusion razor and Tide Pots to the top, nor is it a mere stroke of luck that’s subtly changing Procter & Gamble’s M.O. back into something exciting. It’s CEO David Taylor, who was named the company’s top executive in July of last year, and hit the ground running in a brand new direction, at a much faster pace than the company had run in a while.

Not that one sound bite from a CEO can fully tell the whole story of a turnaround, but in February Taylor said a mouthful when he noted of the company’s future: “The real standard that we’re going to try to stretch is to have a ‘wow’ first-use difference.”

The bulk of what Taylor has accomplished before and after saying those words jibes with his personal mission.

His raised standards aren’t just a slogan either. He knows what he’s trying to do, why he’s doing it and how to do it. He has been with P&G since 1980, and has done a lot of lower-level grunt work for the company, including heading up a paper mill.

He has spent far more time in the manufacturing arm of the company than the marketing side of the business … in a good way.

There isn’t apt to be a better-suited person on the planet for the P&G CEO job than David Taylor. The numbers and products are starting to verify it.

Bottom Line for PG

To be clear, Procter & Gamble still has a great deal of work to do; Tide Pods alone aren’t going to cut it. On the other hand, PG stock is priced now based on where it’s apt to be in the future, and the Procter & Gamble’s future looks more promising now than it has in a long while. And at only 57 years of age, David Taylor has plenty of time to keep pushing the P&G boulder up a hill.

You could certainly do a lot worse.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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