P&G Attractive Despite Tepid Results

Erin Lash: On the surface, Proctor and Gamble's fourth-quarter and full-year results left little to cheer about, with organic sales growth tapping in at just 1% and margin contraction at both the gross and operating income lines. However, we think the firm is laying the foundation for more solid gains longer term.

Sales continue to be hampered by intense competitive pressures in both its grooming and baby business, which were each down 2% to 3% on an organic basis. However, the remainder of its mix both did sales gains north of 3%, which we think evidences the efforts the firm has taken to eliminate and rationalize its brand mix and focus its resources on its highest return opportunities.

Further, the firm is not just looking to boast outsize sales gains, but rather is also working to extract efficiencies from its business and drive productivity savings, the fruits of which we anticipate it will invest behind both research and development and marketing spend, and ultimately support the brand intangible assets that underlay its wide economic moat.

As a result, we view the current discount of 15% to 20% relative to our $98 dollar fair value estimate as warranting an attractive opportunity for long-term investors to build a position in this wide-moat name.