The Procter & Gamble Company (NYSE:PG) is increasing the profitability of its over $1 billion a year in sales in globally well-known brands like Pampers, Crest and Gillette through waste-reduction practices, while at the same time combining organic growth with share buybacks, creating a long-term investment opportunity, says Todd C. Ahlsten, Chief Investment Officer and Portfolio Manager at Parnassus Investments.
“From a valuation standpoint, we think P&G has just bedrock cash flows, dividends, and versus its current price of $68 per share, we see downside into the mid $50s and upside into the $80s in the next three years. Combined with the dividend yield, we like the risk/return,” Ahlsten said.
Ahlsten also highlights P&G‘s waste reduction in brands like Gillette, where they have cut plastic by 50% and weight by 20% in some models, a practice that made sense environmentally as well as financially. P&G is also engaged in ESG-type practices through its PUR water products, and the company has provided over a billion liters of clean water in developing areas for children.
“From an ESG standpoint, P&G has done a lot of very good things, such as reducing waste and energy usage by over 50% in the last 10 years, reducing CO2 emissions over 50% in the past decade, and finally, cut water usage by over half as well. So in terms of waste, water, energy and emissions, kind of WWEE, they’ve all reduced those by 50% to 60% in the past 10 years, which is a tremendous focus on those areas, which not only makes business sense, but obviously is great for the environment,” Ahlsten said.
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