The Procter & Gamble Company (PG Quick QuotePG - Free Report) has sustained strong growth by leveraging its solid market position, and focusing on productivity and cost-efficiency. However, its current forward 12-month price-to-earnings (P/E) ratio of 22.63X raises questions about whether the stock is fairly valued. This multiple is significantly higher than the Zacks Consumer Products – Staples industry average of 20.58X, making the stock appear relatively expensive.

The price-to-sales (P/S) ratio of Procter & Gamble, a distinguished name in the consumer staples sector, is 4.41X, above the industry’s 2.34X. This adds to investor unease, especially considering its Value Score of F, which suggests that it may not be a strong value proposition at current levels.

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PG’s Premium Valuation Surpasses Peers

At 22.63X P/E, Procter & Gamble is trading at a valuation much higher than its competitors. The company’s peers, such as The Clorox Company (CLX Quick QuoteCLX - Free Report) , Albertsons Companies (ACI Quick QuoteACI - Free Report) and Energizer (ENR Quick QuoteENR - Free Report) , are delivering solid growth and trade at more reasonable multiples. Clorox Company, Albertsons Companies and Energizer have forward 12-month P/E ratios of 20.27X, 9.87X and 7.68X — all significantly lower than that of PG. At such levels, Procter & Gamble’s valuation seems out of step with its growth trajectory.

The PG stock’s premium valuation suggests that investors have strong expectations for its growth. However, the stock currently seems somewhat overvalued. Procter & Gamble’s ability to meet or exceed these lofty expectations is crucial in justifying its premium pricing.

In the past year, the company’s shares have risen 4.9%, underperforming the broader industry’s growth of 5.4%. However, the company has outperformed the Zacks Consumer Staples sector’s growth of 0.4% and the S&P 500’s decline of 2%.

Procter & Gamble’s performance is notably stronger than that of its competitors, Albertsons Companies and Energizer, which have risen 4.8% and 0.2%, respectively, in the past year. Also, PG has outperformed Clorox Company, which declined 0.3% in the same period.

Procter & Gamble’s One-Year Stock Return

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PG’s current share price of $163.75 reflects a 9.2% discount to its recent 52-week high mark of $180.43. Also, the stock reflects a 6.7% premium from its 52-week low of $153.52.

Procter & Gamble trades above its 50 and 200-day moving averages, indicating robust upward momentum and price stability. The moving average is an important indicator for gauging market trends and momentum.

Is Procter & Gamble’s Premium Valuation Built to Last?

PG is contending with a range of challenges, led by macroeconomic pressures and rising geopolitical tensions. Among the most concerning headwinds are those in Greater China, where reduced consumer spending and declining volumes continue to impact performance. Notably, organic sales in the region fell 3% year over year in the second quarter of fiscal 2025. Brand-specific struggles are compounding these issues, particularly for PG’s flagship beauty brand, SK-II, which has faced reputational hurdles tied to its Japanese heritage.

The global outlook remains uncertain, with persistent risks related to inflation, input costs, currency volatility, evolving consumer behaviors and retailer dynamics — all of which could pressure future performance.

Procter & Gamble’s selling, general and administrative (SG&A) expenses remain elevated, reflecting ongoing supply-chain disruptions, inflationary trends and increased transportation costs. In second-quarter fiscal 2025, the currency-neutral SG&A rate rose by 30 basis points (bps) to 26%. This increase was primarily driven by 210 basis points of reinvestments, partially offset by productivity gains and sales leverage.

For third-quarter fiscal 2025, core SG&A expenses are projected to rise 3.6% year over year, with SG&A as a percentage of sales expected to increase 10 bps.

PG’s vast international footprint exposes it to significant foreign currency risks. For fiscal 2025, currency headwinds and divestitures are expected to shave 1% off of total sales growth. Additionally, core EPS faces a projected impact of 20 cents per share due to $200 million in higher commodity costs and a $300-million hit from unfavorable exchange rates. The company highlighted that fiscal 2024 included one-time benefits from minor brand divestitures and tax advantages, which are factors unlikely to recur, resulting in an additional EPS headwind of 10-12 cents.

With persistent FX pressures and slower market growth, Procter & Gamble’s management is guiding toward the lower end of its projected revenue and earnings ranges for fiscal 2025.

PG’s Estimate Revision Trend

The Zacks Consensus Estimate for Procter & Gamble’s fiscal 2025 and 2026 EPS moved down 0.1% and 0.4%, respectively, in the last seven days. However, revenue and EPS estimates for fiscal 2025 and 2026 indicate year-over-year growth.

For fiscal 2025, the Zacks Consensus Estimate for PG’s revenues and EPS implies year-over-year growth of 1.2% and 4.9%, respectively. The consensus mark for fiscal 2026 revenues and EPS indicates 3.1% and 6.1% year-over-year growth, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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Procter & Gamble: Navigating Challenges With Strategic Resilience

Despite a notable deceleration in revenue growth, PG has demonstrated strong operational discipline by effectively safeguarding its bottom line. The company’s ongoing success lies in its ability to adapt to changing consumer, customer and societal needs, anchored by a long-term strategy focused on sustainability, innovation and operational excellence.

To support profitability, Procter & Gamble is driving growth through market expansion and category leadership, leveraging its portfolio of essential, performance-driven products. This focus has delivered consistent momentum across categories and geographies, underpinned by the strength of its brands and strategic execution.

In the second quarter of fiscal 2025, PG reported a 3% year-over-year increase in organic sales, supported by 2% organic volume growth. Pricing, foreign exchange and other factors, including acquisition and divestiture impacts, had a neutral effect in the quarter. All business segments contributed to growth, highlighting the broad-based strength of PG’s portfolio. Core earnings came in at $1.88 per share, up 2% from the prior-year quarter and beating the Zacks Consensus Estimate.

To sustain this growth and offset rising input costs, Procter & Gamble is aggressively pursuing productivity and cost-saving initiatives. A key element of this strategy is the company's rolling three-year productivity master plans, which target up to $1.5 billion in pre-tax gross savings in the cost of goods sold. These efforts are powered by global programs like “Supply Chains 3.0,” designed to modernize operations and enhance supply-chain efficiency across key categories.

Further supporting this initiative, PG is partnering closely with retailers to identify end-to-end savings opportunities while simultaneously investing in digital tools to streamline logistics and improve agility. Enhanced fill-rate management, dynamic routing and smarter sourcing are expected to drive $200-$300 million in incremental savings while helping reduce overhead and improve marketing ROI.

Through a balanced approach of strategic reinvestment, cost discipline and digital innovation, Procter & Gamble is well-positioned to weather near-term economic headwinds while reinforcing its long-term growth trajectory. With a focus on adaptability, operational efficiency and brand strength, the company continues to prioritize shareholder value in a dynamic global environment.

How to Play PG?

Procter & Gamble’s extensive global footprint and well-diversified brand portfolio provide a solid foundation for long-term revenue stability. Steady performance in North America and a cohesive, integrated strategy contribute to a constructive outlook. However, ongoing geopolitical tensions, currency fluctuations and market-specific challenges, particularly in Greater China, pose notable headwinds.

PG’s premium valuation relative to peers raises questions about sustainability, especially in a competitive and uncertain economic environment. Investors should carefully consider these risks in light of their individual risk tolerance. For those currently owing this Zacks Rank #3 (Hold) stock, maintaining positions may be prudent, given the company’s strong market position and long-term growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.