Company DCF analysis file
Procter & Gamble DCF Analysis
Procter & Gamble’s DCF should turn category demand, net pricing and manufacturing economics into cash after the investment and taxes actually required. Adjusted cash measures are useful reconciliations, but adding back a specified payment does not make that payment disappear. Keep the annual operating base, category mix and cash claims on explicit dates.
Compare product cost and brand support on the same basis
Fiscal years ended June 30, 2025 and June 30, 2026; consolidated company. Selected category and cash lines are rounded to $ millions. Amounts use the monetary scale stated in each table caption. Source: annual financial statements. Reported lines retain the issuer’s scope; derived ratios use the displayed denominators.
| Measure | FY2025 | FY2026 |
|---|---|---|
| Net sales | 84,284 | 87,032 |
| Product costs | 41,164 | 43,362 |
| SG&A | 22,669 | 23,922 |
| Operating income | 20,451 | 19,748 |
| Consolidated net earnings | 16,065 | 16,144 |
| Earnings attributable to P&G | 15,974 | 16,046 |
| Gross margin: derived | 51.2% | 50.2% |
| Operating margin: derived | 24.3% | 22.7% |
Net sales are already after the relevant trade-promotion deductions. Do not subtract the same recognized promotion again while forecasting from that net basis. SG&A also includes research and brand-support costs under the filing’s policy; adding a second research deduction on top of the reported line would double-count expense.
Build category volume, realized net price and mix together with material, conversion and distribution costs. A pricing case should include its demand and promotion consequences, rather than assuming that every increase in net price becomes incremental operating profit. Retain the brand and innovation spending required by the proposed terminal product mix.
Read category sales without treating them as free cash flow
Source: annual segment table. Rounded category/corporate values differ from the reported company total by $1 million; the reported total is retained.
| Category | Net sales |
|---|---|
| Beauty | 16,023 |
| Grooming | 6,918 |
| Health Care | 12,456 |
| Fabric / Home Care | 30,314 |
| Baby / Feminine / Family Care | 20,401 |
| Corporate | 919 |
| Company total | 87,032 |
Use a category-specific explanation for premium mix, channel demand and cost response. A sale in Fabric & Home Care need not carry the same economics or working-capital cycle as a Beauty sale. Any allocation of consolidated cash to categories is an analytical assumption, not supplied by this sales table.
Trace earnings into cash and reinvestment
Reconciliation source: annual earnings and cash-flow statements. Subtotals below are checkpoints, not extra amounts to add. Grouped adjustments are calculated from the disclosed cash-flow lines.
| Step | FY2026 |
|---|---|
| Operating income | 19,748 |
| Net interest / other nonoperating | 629 |
| Income taxes | -4,233 |
| Consolidated net earnings: subtotal | 16,144 |
| Depreciation / amortization | 3,160 |
| Other non-cash / reconciliation | 224 |
| Operating balances / other | 29 |
| Displayed-line rounding reconciliation: derived | -1 |
| Operating cash: subtotal | 19,556 |
| Capital spending | -4,409 |
| After capital spending: derived | 15,147 |
| Specified tax-payment add-back | 688 |
| Issuer adjusted free cash flow | 15,835 |
Other reconciliation groups share compensation, deferred tax and asset-sale gains. Operating balances and other combine receivables, inventory, payables and the statement’s other movement. The derived rounding line reconciles the displayed rounded components to the issuer’s reported total; it is not a separate reported cash transaction.
The specified tax-payment add-back explains the adjusted measure. It does not reverse the cash paid during the year. Decide whether the forecast needs the payment, a future tax schedule or an explicitly defined normalization, and keep the shareholder cash claim consistent with that decision.
Dated funding and claim boundaries
These amounts are dated June 30, 2026, from the annual balance sheet. They are not updated market-date balances.
| Measure | Amount |
|---|---|
| Cash / equivalents | 9,942 |
| Debt due within one year | 11,296 |
| Long-term debt | 22,842 |
| Debt less cash: derived | 24,196 |
The derived net amount subtracts cash only from the displayed borrowing categories. A valuation-date bridge must still assess cash availability, the chosen lease convention, noncontrolling interests and any other relevant claims. A per-share result also needs an appropriately dated diluted-share reconciliation.
Test a net-sales change before assuming cash conversion
Illustration: increase the FY2026 net-sales basis by 1%, holding displayed product costs and SG&A fixed. This is an isolated operating sensitivity, not pricing guidance or evidence that promotion, volume and costs would remain unchanged.
| Measure | Historical basis | Illustrative case |
|---|---|---|
| Net sales | 87,032 | 87,902.3 |
| Operating income | 19,748 | 20,618.3 |
The exact pre-tax operating change is $870.32 million, displayed to one decimal. A complete case should let consumer demand, trade terms, production cost and working capital respond. The operating sensitivity does not establish an equal cash or equity-value increase.
Keep interim reporting separate from the annual basis
Q1 FY2027 covers 2026-07-01 through 2026-09-30 and was released 2026-10-22. Revenue was $23,276 million in this quarter. Source: official Q1 FY2027 results.
The later first quarter is FY2027. Keep its category and cash-tax developments separate from the completed FY2026 results, and bridge annual closing balances to the valuation date rather than annualizing a quarterly margin.
Turn the financial basis into a DCF case
| Decision | Treatment |
|---|---|
| Demand and mix | Model category volume, net pricing and promotions together. |
| Operating cost | Retain manufacturing, distribution, brand and research support within the reported expense scope. |
| Taxes and claims | Separate payment timing, reported tax and any stated adjustment; a cash add-back does not extinguish a claim. |
| Reinvestment | Fund the plants, products and operating balances needed by the terminal category mix. |
| Valuation | Use a consistent enterprise or equity cash definition, then reconcile dated financing claims, available cash and dilution. |
A conventional enterprise bridge starts from operating earnings after an explicit operating tax assumption, adjusts non-cash allocations and deducts reinvestment and operating funding. Starting from reported operating cash requires a financing and tax reconciliation. The adjusted cash measure above is a disclosed historical definition, not a substitute for that forward operating and claims bridge.
The Procter & Gamble company analysis explains the wider operating context. Use the company forecast tool and DCF calculator with explicit assumptions. Use the historical financials to define an explicit operating and reinvestment case, then supply valuation-date capital costs, claims and diluted shares. Check that each cash claim is counted once before deriving a per-share value.
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