FINANCIAL RATIO ANALYSIS
PROCTER & GAMBLE | PFIZER INC
FINANCE 405 | FALL 2012
Procter & Gamble
William Procter and James Gamble, immigrants from England and Ireland respectively, met when they married into the Norris family. Their father-in-law suggested they build their own company since both men had useful trades- Procter was a candle maker, Gamble a soap maker. The two officially became business partners in 1837 with the founding of Procter & Gamble. 2012 celebrates “175 years of innovation” and seven generations of providing the some of the most well known products around the globe.
Procter & Gamble became incredibly successful during the Civil War when their products were both necessary and available to the Union Army. As a result, their products travelled the country with the soldiers giving them increased exposure and revenues. In 1879 P&G released its first branded product, Ivory Soap. In 1886, Ivorydale factory began production in a technologically advanced and agreeable work environment- an approach considered advanced for that time period. This marked the beginning of the company’s many progressive movements, the next appearing in 1923 as P&G became one of the first companies to advertise on radio through the use of commercials. Since then, Procter & Gamble has consistently developed its brand through affordable, durable, and trusted home items including Tide (1946), which was referred to as the “washday miracle”, Olay (1952), Crest (1955) which transformed oral hygiene in the home, Pampers (1961), and Pantene Pro-V (1991). Procter & Gamble pharmaceuticals and prescription drugs also hold some of the most trusted brands on the market today. Pepto-Bismol, Metamucil, NyQuil, and Prilosec OTC are also among these, serving to meet the health care needs of its consumers.
Procter & Gamble also works to maintain its brand as one that aims to help improve the world more than it intends to increase revenues. Procter & Gamble’s purpose is to not only provide products from a trusted brand of superior quality, but to improve the lives of people around the world more completely than others. For example, P&G created the Children’s Safe Drinking Water program in 2004 by using self-developed water purifying sachets. This displays the commercial opportunities they have across the globe, but also demonstrates the company’s intrinsic values to create a culture of caring and improving lives beyond the product.
It’s important to disclose here that while Procter & Gamble consistently has a positive growth trend line year-to-year, the company has been under scrutiny and controversy with CEO Robert McDonald underperforming with lower profits and a decline in market shares. Furthermore, DJIA ranked P&G at number 22 out of their top 30 broker picks in October, 2012. The following financial analysis should help determine whether or not this is simply a slower growth period in the industry for P&G, and if the company is truly as sustainable as all other factors currently lead one to believe.
Founded by German entrepreneurs and cousins Charles Pfizer and Charles Erhart in the heart of Brooklyn, NY, Pfizer Inc is among today’s most profitable pharmaceutical companies. Since 1849, Pfizer has consistently discovered and developed superior ways to prevent, treat, and improve the health of people around the world. Pfizer and Erhart, a chemist and a confectioner respectively, worked together to create their first product santonin- innovative in quality, taste, and looks.
The Civil War proved to be a useful tool for the growth of Pfizer as the need for painkillers and disinfectants soared. Vital drugs included an expansion of their products tartaric acid and cream of tartar as well as morphine,...