Procter & Gamble (PG)

Consumer products behemoth Proctor & Gamble (NYSE:PG) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 3% year on year to $22.39 billion. Its non-GAAP profit of $1.99 per share was 4.9% above analysts’ consensus estimates.

Company Overview

Founded by candle maker William Procter and soap maker James Gamble, Proctor & Gamble (NYSE:PG) is a consumer products behemoth whose product portfolio spans everything from facial tissues to laundry detergent to feminine care to men’s grooming.

Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.

Competitors that offer a wide range of household and personal care products include Kimberly-Clark (NYSE:KMB), Unilever (LSE:ULVR), Colgate-Palmolive (NYSE:CL), and Church & Dwight (NYSE:CHD).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $84.93 billion in revenue over the past 12 months, Procter & Gamble is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because it’s harder to find incremental growth when your existing brands have penetrated most of the market. For Procter & Gamble to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, Procter & Gamble’s 1.8% annualized revenue growth over the last three years was sluggish. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

This quarter, Procter & Gamble reported modest year-on-year revenue growth of 3% but beat Wall Street’s estimates by 1%.

Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months, similar to its three-year rate. Although this projection indicates its newer products will catalyze better top-line performance, it is still below the sector average.

When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.

The demand for Procter & Gamble’s products has been stable over the last eight quarters but fell behind the broader sector. On average, the company has posted feeble year-on-year organic revenue growth of 2.3%.

In the latest quarter, Procter & Gamble’s organic sales rose by 2% year on year. This performance was more or less in line with its historical levels.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Procter & Gamble has great unit economics for a consumer staples company, giving it ample room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an excellent 51.4% gross margin over the last two years. That means for every $100 in revenue, only $48.57 went towards paying for raw materials, production of goods, transportation, and distribution.

Procter & Gamble’s gross profit margin came in at 51.4% this quarter, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Procter & Gamble’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 25.5% over the last two years. This profitability was elite for a consumer staples business thanks to its efficient cost structure and economies of scale. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Procter & Gamble’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Procter & Gamble generated an operating margin profit margin of 26.2%, down 1.6 percentage points year on year. Since Procter & Gamble’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, Procter & Gamble reported adjusted EPS of $1.99, up from $1.93 in the same quarter last year. This print beat analysts’ estimates by 4.9%. Over the next 12 months, Wall Street expects Procter & Gamble’s full-year EPS of $6.89 to grow 2.8%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Procter & Gamble has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 18.6% over the last two years.

Procter & Gamble’s free cash flow clocked in at $4.90 billion in Q3, equivalent to a 21.9% margin. This result was good as its margin was 6.6 percentage points higher than in the same quarter last year. Its cash profitability was also above its two-year level, and we hope the company can build on this trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Procter & Gamble hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 23.2%, impressive for a consumer staples business.

Procter & Gamble reported $11.17 billion of cash and $35.95 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $24.8 billion of EBITDA over the last 12 months, we view Procter & Gamble’s 1.0× net-debt-to-EBITDA ratio as safe. We also see its $246 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Procter & Gamble beat analysts’ EBITDA expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 2.5% to $156.06 immediately after reporting.

Updated: December 4, 2025 at 9:39 PM EST

When considering an investment in Procter & Gamble, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

We think Procter & Gamble is a solid business. Although its revenue growth was uninspiring over the last three years, its growth over the next 12 months is expected to be higher. And while Procter & Gamble’s projected EPS for the next year is lacking, its impressive operating margins show it has a highly efficient business model. On top of that, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

Procter & Gamble’s P/E ratio based on the next 12 months is 20.7x. Looking at the consumer staples landscape right now, Procter & Gamble trades at a pretty interesting price. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $169.05 on the company (compared to the current share price of $145.45), implying they see 16.2% upside in buying Procter & Gamble in the short term.