2 · How we research a company — Procter & Gamble (PG)
Rather than give readers a list of stocks, we want to explain the research process. Procter & Gamble reports this week, so we use it as an example of how to decide whether a company belongs in a portfolio. This explains a method; it is not a recommendation.
US earnings week ahead, 19–23 Oct 2026 — Stock Titan. P&G reports before the open on Thursday.
Reports: before the open on Thursday 22 October 2026 (fiscal Q1 2027).
The company at a glance
P&G at $159.35 on 16 Oct — Investing.com. ‘Earnings in 4 days’; five-year total return about +31%.
Company snapshot: P&G traded at $159.35 on 16 October, giving it a market value of about $370bn. The shares were valued at roughly 24 times earnings and offered a 2.7% dividend yield. A beta of 0.38 suggests the share price usually moves much less than the wider market. Its next earnings report is due on Thursday 22 October.
Several points stand out. P&G has increased its dividend for 43 years in a row. Its beta of 0.38 means the shares usually move less than the wider market, so they often hold up better when markets fall. However, after a strong rise, the shares may have climbed too far too quickly: their 14-day RSI is around 75, and the price is close to analysts’ average target.
P&G key statistics — Investing.com. Next earnings 22 Oct; 43-year dividend-raise streak; beta 0.38.
Why P&G earnings are a useful read on the whole economy
P&G sells products that people buy regularly, including Tide, Pampers, Gillette, Crest and Dawn. Its results therefore give us a useful view of household spending. Three parts of the report can tell us more about consumers:
● Units sold compared with prices. If sales rise only because prices are higher while the number of products sold stays flat, shoppers may be under pressure. That is what happened in fiscal 2026: sales rose 3% to $87.0bn, but the number of units sold was flat. A 2% currency benefit and 1% higher prices produced the growth.
● Switching to cheaper products. When households choose lower-cost store brands, P&G’s underlying sales growth slows. Organic growth of only 1% this year suggests consumers are being careful.
● Profit on each sale. Gross margin shows how much profit remains after direct costs. It helps us see whether materials, shipping and tariffs are becoming more expensive. P&G’s gross margin fell to about 50.9% this year from a peak of roughly 51.4% in FY24, suggesting costs are rising again.
Even before the headline results arrive, P&G helps us ask a simple question: can households still cope with higher prices, or have they reached their limit?
The five-year trend — income statement
Income statement summary — overall uptrend: From FY22 to FY26, net sales rose steadily from $80.2bn to $87.0bn, while gross profit increased from $38.0bn to $44.3bn. Net earnings were nearly flat at about $14.7bn–$14.9bn through FY24, then moved up to $16.0bn in FY25 and remained there in FY26. Diluted earnings per share followed a clear uptrend, rising each year from $5.81 to $6.62. Gross margin is the exception: it improved from 47.4% in FY22 to a peak of 51.4% in FY24, then slipped to 50.9% by FY26. Overall, revenue, profit and earnings per share show a gradual uptrend, while the recent margin trend is slightly down.
What the trend says: Sales grow slowly and steadily, by about 2% a year. Most of that growth comes from higher prices rather than selling more products. Gross margin weakened during the FY22–23 cost increase, recovered strongly in FY24, and has slipped since then. Profit was flat for three years before rising in FY25–26. This is a slow-growing but dependable business, not a high-growth company.
P&G revenue vs net earnings, FY2022–FY2026 (US$ bn).
P&G five-year statements, FY2022–FY2026 — Investing.com.
The five-year trend — balance sheet
Balance sheet summary — positive uptrend: Total assets increased every year, from $117.2bn in FY22 to $126.5bn in FY26. Total equity also rose steadily, from $46.9bn to $54.3bn, while retained earnings climbed each year from $112.4bn to $135.9bn. Liabilities were mixed rather than directional: they rose to $73.8bn in FY23, then moved within a narrow range and ended at $72.2bn in FY26. Overall, the balance sheet shows an uptrend in assets, equity and retained earnings, with liabilities broadly stable rather than rising sharply.
P&G balance sheet in full — Investing.com. Retained earnings ($136bn) net against about $143bn of treasury stock (buybacks).
What the trend says: The business is stable and financially sound. Assets are growing slowly, debts and other liabilities are broadly flat, and shareholders’ equity has increased. Retained earnings rose every year, from $112bn to $136bn, showing that P&G earns more than it pays out. One point needs explaining: retained earnings of $136bn are much larger than total equity of $54bn. The main reason is years of share buybacks, with about $143bn of treasury stock reducing reported equity. The balance sheet tells the same story: P&G returns most of its spare cash to shareholders.
The five-year trend — cash flow & free cash flow
Cash flow summary — uneven uptrend: Operating cash flow rose overall from $16.7bn in FY22 to $19.6bn in FY26, although it peaked at $19.8bn in FY24 and dipped in FY25. Free cash flow after debt payments followed the same uneven pattern, increasing from $10.0bn to $13.3bn over five years, with a temporary fall in FY25. Net earnings moved from $14.7bn to $16.0bn, but were flat in FY26. Overall, cash generation is on an uptrend across the five years, but the year-to-year path is not smooth.
Why we look here first: Operating cash flow shows whether the main business turns sales into real cash. For P&G, operating cash flow is higher than reported profit in most years. That suggests the profits are backed by cash, not just accounting entries. Free cash flow is the cash left after spending on factories and equipment. It can be used for dividends, share buybacks and other needs.
The catch: Using P&G’s measure — operating cash flow minus spending on long-term assets — free cash flow was about $15.8bn in FY26, almost equal to net earnings. On the stricter measure in the table, which also accounts for debt payments, it was about $13.3bn. P&G returned roughly $15bn to shareholders through dividends and buybacks, so it paid out nearly everything it generated. That benefits shareholders but leaves less spare cash for a difficult year. This is why FY27 guidance of only 1–5% EPS growth matters. The key question this week is whether the number of products sold finally rises or falls again.
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