PG

Financial health: Fair6.4/10

5 strengths, 2 concerns. Weakest points: current ratio, peg ratio.

• Debt to equity: 0.54 (Watch, benchmark < 0.5) — Debt of 0.54x equity is moderate against the 0.5x benchmark. It has improved over the last 4 years.
• Net debt vs cash flow: 1.3y (Strong, benchmark < 4 years) — Net debt of $19.4B is 1.3x annual free cash flow — about a year of cash flow to repay.
• Current ratio: 0.68 (Concern, benchmark > 1.5) — Short-term assets cover only 0.68x short-term liabilities — below 1.0, meaning bills due this year exceed the assets on hand to pay them. It has been broadly flat over the last 4 years.
• Return on equity: 29.6% (Strong, benchmark > 15%) — Earns 29.6% on shareholder equity, comfortably past the > 15% mark.
• Gross margin: 50.6% (Strong, benchmark > 40%) — Keeps 50.6% of revenue after the direct cost of sales, comfortably past the > 40% mark.
• Net margin: 18.2% (Strong, benchmark > 10%) — Turns 18.2% of revenue into profit, comfortably past the > 10% mark.
• Free cash flow: $15.1B (Strong, benchmark positive) — Generated $15.1B of free cash flow after capital spending. It has been broadly flat over the last 4 years.
• Revenue growth: 4.0% (Watch, benchmark > 10%) — Revenue changed 4.0% year on year, short of the > 10% mark.
• Earnings growth: 0.8% (Watch, benchmark > 10%) — Earnings changed 0.8% year on year, short of the > 10% mark.
• PEG ratio: 4.31 (Concern, benchmark < 1) — At 4.31, the price looks expensive relative to expected growth — Lynch treated 1.0 as fair value.
• Payout ratio: 64.6% (Watch, benchmark < 60%) — Pays out 64.6% of earnings as dividends — above the level usually considered sustainable.