colgate p&g comparative analysis
DESCRIPTION
Compared Financial ratios and statements. Evaluated capital structure, fund flow and working capital flow. Forecasted financials of the next 3 years. Calculated the market Beta and WACC.TRANSCRIPT
Colgate-Palmolive
Pradnya Deshpande | Eric Ponzio | Mehgan Klare | Kim Wilken | Scott Musser
Procter & Gamble
Accounting 647 Analyst Project and Opinion December 4, 2009
Colgate-Palmolive
• Founded by William Colgate in 1806– Palmolive founded by B.J. Johnson in 1864; merged 1928
• Initial Products: Soap, Candles, Starch, Toothpaste in Jars.
• Expanded by acquiring firms internationally. • Consumer Products – Soap and Other Detergent
Manufacturing• Operations in more than 70 countries, and sells in
about 200 countries.
Source: Hoovers Online
Colgate-Palmolive
• In 2008, completed a four year restructuring plan designed to: – Reduce workforce• Shut down 25 out of 78 factories • Reducing 12% of workforce
– Increase profitability – Reallocate resources to support expected growth – Leverage global market efficiencies
Source: Hoovers Online
Procter & Gamble
• Founded in 1837 by William Procter (candle maker) & James Gamble (soap maker)
• Initial Products: Ivory Soap and Crisco Shortening
• 1947 Tide Detergent becomes a staple of the company.
• After developing Tide, company grew and diversified through aggressive acquisition strategy.
Source: Hoovers Online
Procter & Gamble
• Divided into three global units – Health and Well-being – Beauty – Household Care
• Consumer Products – Soap and Other Detergent Manufacturing
• Purchased Gillette Company for $57 Bn. in 2005• Reorganization strategy (2007) has enabled PG
to react quickly and strategically in its industriesSource: Hoovers Online
Key Assumptions
• Forecasts based on sales growth (Jefferies)• Operating items grown at percent of sales• Non-operating items held constant• Target cash balance and financial plug• WACC– Risk Free Rate 3.5%– Market Premium 5.0%– Beta: Colgate=0.725, P&G=0.6
Financial Comparison
Revenue ($ Mil.) Gross Profit ($ Mil.) Operating Income ($ Mil.)
Total Net Income ($ Mil.)
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Procter & Gamble Colgate-Palmolive
Source: Hoovers Online
Financial Comparison
ROE 20.27% 93.20%ROA 9.64% 19.48%Current Ratio 0.71 1.26Quick Ratio 0.35 0.74X Interest Earned 11.87 31.60Altman Z-Score 2.72 6.75
Stock Price Comparison
Source: Yahoo Finance Charts
Stock Price Comparison
Source: Yahoo Finance Charts
Analyst Opinion
Revenue ($ Mil.)
Gross Profit ($
Mil.)
Operating Income ($
Mil.)
Total Net Income ($
Mil.)
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Procter & Gamble Colgate-PalmoliveROE 20.27% 93.20%
ROA 9.64% 19.48%Current Ratio 0.71 1.26Quick Ratio 0.35 0.74X Interest Earned 11.87 31.60Altman Z-Score 2.72 6.75
Buy Colgate-Palmolive