Let’s compare snapshots of Procter & Gamble between 2006 and 2016.
In 2006, each share of Procter & Gamble represented $2.64 in net profits. In 2016, each share of Procter & Gamble earned $3.67 in net profits. That seems like a disappointing, though tolerable, ten years of 3.35% annual growth.
The reality is worse, though. Over this time Procter & Gamble added $7 billion in debt and leaned on that financing along with $20 billion in retained profits over the decade to retire 500 million shares of stock.
The other big strategic decision at Procter & Gamble has involved the sale of low-margin businesses as the company focuses its core on its most lucrative brands. As a result, net profits have increased from 12.5% to 16.0% over the past ten years.
The problem is that Procter & Gamble has been using buybacks and its shift towards high-margin products to cover … Read the rest of this article!