3 Reasons Why This Is the Wrong Time to Buy Procter & Gamble

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Proctor & Gamble (NYSE:PG) is the stock to buy for steady sales and profits, regular dividend payouts and dividend growth, and overall reliability. It has an incredible track record, having been in business for 176 years and having raised its dividend for an incredible 58 consecutive years. Those investors who prefer the tortoise investment strategy to the hare investment strategy tend to flock to this stock, and while it has had its share of problems, they have ben right.

Last week, P&G released its third-quarter earnings figures. The company bragged that it grew its organic sales by 3 percent from the third quarter of 2013, and this is nothing to scoff at. But if we look at the overall numbers, we see that sales were essentially flat thanks to a strong dollar. Furthermore, because of the strong dollar, only one of the company’s five segments — fabric care and home care — showed net sales gains.

Therefore, the company’s net revenues were not so impressive: they actually shrank by $40 million, from $20.6 billion to $20.56 billion. However, net income actually grew slightly, by about $43 million. This largely reflects the fact that commodity prices are lower today than they were a year ago.

Given these points, it doesn’t seem as if there is anything wrong with P&G’s business. However, the shares trade at 22 times trailing earnings, and this seems pretty rich for a company that hasn’t been growing. The reason for this premium is that analysts expect P&G’s profits to grow. In 2014, they are expected to come in at $4.20 per share, and in 2015, they are expected to come in at $4.54 per share. This is up from just $3.71 in the trailing 12-month period.

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