Procter & Gamble (PG) is a consumer products giant that sells its products in more than 180 countries. The stock has rallied 21% since early May. As such a steep move is rather unusual for this slow-moving stalwart, the big question is whether the stock can still offer attractive returns from its current price.

Procter & Gamble has dramatically underperformed the market in the last five years, as it has gained only 13% whereas S&P has rallied 73%. This underperformance has mostly been caused by the fierce competition in the retail sector. Consumers have become price-conscious and hence private-label products have gained market share. In addition, large retailers, such as Walmart and Target, exert great pressure on their suppliers for lower prices. Consequently, Procter & Gamble has failed to meaningfully grow its revenues and its earnings for a whole decade. Moreover, its gross margin and its operating margin have essentially remained flat for a whole decade, around 49% and 20%, respectively.

Due to this poor performance, management has implemented a major transformation plan in recent years. The company has sold numerous low-margin, low-growth brands and has thus reduced the number of its brands by almost two-thirds, from 170 to 65. In this way, management will now be able to focus only on the most promising brands.

This transformation has already begun to bear fruit. Procter & Gamble grew its adjusted earnings per share by 8% in its fiscal 2018 and is expected to grow its earnings per share by another 5% in this fiscal year. Thanks to this improving business performance, the stock has rallied 21% since early May.

Despite its rally, the stock is still reasonably valued, as it is trading at a forward P/E ratio of 19.3. As the stock has traded at an average P/E ratio of 18.8 during the last decade, its current valuation is very close to its historical valuation. This means that those who have confidence in the turnaround of the company can still initiate a position at a reasonable price.

Moreover, Procter & Gamble has an exceptional dividend record. It has raised its dividend for 62 consecutive years, one of the longest active streaks of any company. In addition, the stock currently offers a 3.4% dividend yield, which may have decreased due to the recent rally of the stock but is still much higher than the dividend yield of S&P. The stock is expected to go ex-dividend on October 18^th.

Investors should also note a key advantage of Procter & Gamble, namely its resilience during recessions. As its products are essential to consumers, the consumer products giant is expected to outperform the market during recessions. In the Great Recession, when most companies saw their earnings collapse, Procter & Gamble saw its earnings per share fall only 1.6% in 2009 and 1.4% in 2010. As a result, the stock outperformed the market by a wide margin during that downturn. Whenever the next recession shows up, investors can rest assured that Procter & Gamble will significantly outperform the market once again.

To sum up, despite its recent rally, Procter & Gamble can still offer attractive returns to those who purchase the stock at its current price. Thanks to approximate 5% annual earnings-per-share growth and its 3.4% dividend, the stock can offer an approximate 8% average annual return in the upcoming years. While many investors may not find this return exciting, they should realize that this return comes with remarkable resilience during recessions and a markedly low volatility of the stock price. As a result, the risk-adjusted return of Procter & Gamble is still indisputably attractive.