Procter & Gamble Co (NYSE:PG) saw its stock tumble after the company’s Q1 earnings failed to meet sales expectations. Since the miss, share price has declined 6% and the stock is trading near six-month lows. It could be an excellent opportunity for value investors to pick up a quality stock on sale.
In a world of analyst expectations and where you’re only as good as your last quarter, Procter & Gamble had a ‘weak’ Q1 since net sales of $16.65 billion missed Wall Street’s estimates of $16.70 billion. A less than 1% variance in expectations has resulted in the stock going on a considerable decline. It wouldn’t be the first time that the market has overreacted, nor will it be the last.
One way to determine whether a stock is oversold is to look at technical indicators. One tool that I like to use is the Relative Strength Index (RSI), which looks at a stock’s average gains and losses, typically over the last 14 trading days. An RSI value of less than 30 indicates that the losses have significantly outweighed the gains, and that the stock is oversold.
Currently, Procter & Gamble’s stock is at an RSI level of 25, and it is the first time the share has been in an oversold state this year.
The stock could be a great buy on the dip, and a company that can still generate profit margins of 17% is an excellent buy, regardless of an earnings miss or not. Investors should take advantage of the discount the stock is trading at and cash in on a good buy.
