Are All-Time Highs Supported In Procter & Gamble?

With shares of Procter & Gamble (NYSE:PG) trading around $81, is PG an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Procter & Gamble engages in the manufacture and sale of a range of branded consumer packaged goods. The company operates in five segments: Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care. The products provided by Procter & Gamble are my regarded as essential to a large segment of the worldwide population. As populations continue to grow and adopt its products and as a leading provider, Procter & Gamble stands to see rising profits for many years. Worldwide demand for Procter & Gamble products will continue to drive profits for this huge conglomerate.

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T = Technicals on the Stock Chart are Strong

Procter & Gamble stock has seen higher highs and higher lows extending back to the the dip of the 2008 Financial Crisis. This trend has led the stock to a break-out and all-time high prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Procter & Gamble is trading slightly above its rising key averages which signal neutral to bullish price action in the near-term.

PG

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Procter & Gamble options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Procter & Gamble Options

18.19%

50%

49%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

June Options

Flat

Average

July Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Procter & Gamble’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Procter & Gamble look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

7.32%

143.9%

-6.80%

47.21%

Revenue Growth (Y-O-Y)

2%

1.98%

-3.67%

-1.17%

Earnings Reaction

-6.56%

4.01%

2.92%

3.13%

Procter & Gamble has seen increasing earnings and revenue figures over most the last four quarters. From these figures, the markets have been mostly pleased with Procter & Gamble’s recent earnings announcements.

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P = Poor Relative Performance Versus Peers and Sector

How has Procter & Gamble stock done relative to its peers, Johnson & Johnson (NYSE:JNJ), Kimberly-Clark (NYSE:KMB), Colgate-Palmolive (NYSE:CL), and sector?

Procter & Gamble

Johnson & Johnson

Kimberly-Clark

Colgate-Palmolive

Sector

Year-to-Date Return

15.94%

24.44%

21.49%

16.63%

16.24%

Procter & Gamble has been a poor relative performer, year-to-date.

Conclusion

Procter & Gamble provides a variety of essential products to consumers in a multitude of countries around the world. The stock has been on a strong run in recent years that has taken it to all-time high prices. Earnings and revenue figures, over the last four quarters, have generally increased which has kept investors upbeat about the stock. Relative to its peers and sector, Procter & Gamble has trailed in year-to-date performance. Look for Procter & Gamble to OUTPERFORM.

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