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Better Buy: The Procter & Gamble Co vs. Kimberly-Clark

PG Chart

The consumer goods sector has held up well through the recent market carnage. Rivals Procter & Gamble and Kimberly-Clark are up 10% in the last six months, compared to an 11% dive in the broader market.

PG data by YCharts .

From their strong dividends to their rock-solid balance sheets and reasonable valuations, it's easy to see why investors would flock to these consumer staples giants as stocks sink. But which one is the better buy right now?

P&G Kimberly-Clark
Market Cap $223 billion $47 billion
Sales Growth 1% 5%
Profit Margin 49% 36%
Dividend Yield 3.3% 2.7%
Forward P/E 23 21

Sales growth is for the last complete fiscal year. Profit margin is over the past 12 months. Data provided by S&P Global Market Intelligence .

P&G wins on profits

Investors who value efficiency should prefer Procter & Gamble . After all, the consumer titan's 49% profit margin trounces Kimberly-Clark's 36%. And P&G is set to widen this gap even more over the years ahead.

PG Revenue (TTM) Chart

PG Revenue (TTM) data by YCharts .

Look closer at the organic growth figures and you'll see that Kimberly-Clark is ahead not just on quantity, but on quality as well. The company managed healthy sales volume gains in each of its key product categories last year. That boost combined with slight price increases to produce the 5% overall growth figure. In contrast, P&G's volume fell across its business segments, and so it has been relying completely on price hikes to achieve any sales growth.

Looking ahead, P&G sees another potentially flat growth result for its fiscal year that ends in June, while Kimberly-Clark sees organic sales improving by 3% to 5% in 2016.

Valuation

Mr. Market is currently offering investors Kimberly-Clark's business for 21 times the $6.10 per share that it is expected to earn this year, a relative bargain compared to P&G's 23 times earnings valuation. But I see a few reasons why that premium might be worth paying.

P&G's significantly higher dividend yield is one, even if its payout ratio has climbed to distressingly high levels recently . Second, sales and profit growth could both start improving next year thanks to that stronger brand portfolio and those falling costs. And finally, foreign currency swings and brand divestments have temporarily hurt both earnings and sales, making P&G seem more expensive than it really is on a price-to-earnings basis.

Bottom line: While either stock is a good choice for conservative investors looking for steady growth and above-average dividends, my view is that P&G is the stronger choice at today's prices.

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The article Better Buy: The Procter & Gamble Co vs. Kimberly-Clark originally appeared on Fool.com.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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