The consumer goods company might go through a breakup as its been reporting disappointing earnings, revenue and growth.
Due to the disappointing last few quarters word’s been going around that Procter and Gamble should consider breaking up of the consumer processed goods ‘industry’ that the company has created. The sole reason of this potential decision is that the company is simply too huge to function, grow and produce satisfying numbers anymore. Another thing that’s affecting the consumer based company is the slow decision making process which is delaying many important changes that need to be worked on.
However, despite of the fact that a break up could prove to be a better decision for the company at this point there is a chance that it could turn out to counterproductive instead. It could exhaust the resources of the company along with time and other costs they it will have to bare. The consumer goods company is currently going through a transformational phase in which it is restructuring. This transformation can take up to 2 years to complete if the break up takes place right now. Besides if the company even goes through with this break up it would just be additional cost for the company.
The Forbes.com believes that breaks up at this point in time is not a suitable option for the company so rather it should just focus on its current strategy and not worry about the break up. The price estimate that the analysts have for P&G’s stock is $76.
The reasons for feeling the need for a break up were that the company was too large to function efficiently and even though it was a huge company it was losing too much to the smaller competitors in the market and furthermore it is losing its entrepreneurial culture that it had initially creative that encouraged innovation. The company is currently working on this present issue with its brand consolidation program since the consumer giant has been posting disappointing results since the past two years in terms of innovation, growth, revenue and earnings.
There are over 100 brands of the company that have been underperforming and to divest in them would mean the company will incur a loss of at least 14% of P&G’s total revenue. On December 4, 2015 the shares of the consumer goods went up by 2.5%. Last week’s high that was recorded was $76.75 and the peak was $77.30. P&G’s market capital is 211.74 billion and the earnings per share reported by the consumer goods company was 3.04. The price to earnings ratio is 25.58.
In one year’s time the highest level to which the share price was seen at was $93.89 and the lowest was $65.06.