Clorox Co (CLX, Financial) has experienced a daily loss of -6.64% and a 3-month loss of -17.17%. Despite these figures, the Earnings Per Share (EPS) (EPS) stands at 1.19, suggesting a potential undervaluation. This article seeks to analyze whether Clorox Co (CLX) is indeed modestly undervalued. Read on for a comprehensive valuation analysis.
Introduction to Clorox Co
With over a century in operation, Clorox Co (CLX, Financial) has diversified its product offerings in the consumer products space. Their portfolio includes cleaning supplies, laundry care, trash bags, cat litter, charcoal, food dressings, water-filtration products, and natural personal-care products. The company's brands include Liquid-Plumr, Pine-Sol, S.O.S, Tilex, Kingsford, Fresh Step, Glad, Hidden Valley, KC Masterpiece, Brita, and Burt's Bees. Approximately 85% of the company's sales are generated domestically. The current stock price stands at $123.08 per share, with a market cap of $15.20 billion. This article seeks to compare this stock price with the GF Value, an estimation of the fair value of Clorox Co (CLX).
Understanding GF Value
The GF Value is our proprietary measure of a stock's intrinsic value. It's calculated based on historical trading multiples, a GuruFocus adjustment factor considering the company's past returns and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair trading value of the stock. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Presently, Clorox Co (CLX, Financial) appears to be modestly undervalued, according to our GF Value calculation. This suggests that the stock's long-term return is likely to be higher than its business growth.
Financial Strength of Clorox Co
Before investing in a company, it is crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Clorox Co's cash-to-debt ratio stands at 0.13, which is lower than 74.19% of the companies in the Consumer Packaged Goods industry. This gives Clorox Co a financial strength score of 5 out of 10, indicating fair financial strength.
Profitability and Growth of Clorox Co
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Clorox Co, with a high operating margin of 11.14%, has been profitable for the past 10 years. This profitability ranks better than 76.82% of the companies in the Consumer Packaged Goods industry, earning Clorox Co a profitability score of 8 out of 10.
Growth is a significant factor in a company's valuation. The 3-year average annual revenue growth rate of Clorox Co is 4.2%, which is lower than 58.06% of the companies in the Consumer Packaged Goods industry. The 3-year average EBITDA growth rate is -26.6%, which ranks lower than 90.12% of the companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can help evaluate its profitability. Clorox Co's ROIC of 11.96 exceeds its WACC of 5.99, indicating value creation for its shareholders.
Conclusion
In conclusion, Clorox Co (CLX, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks lower than 90.12% of the companies in the Consumer Packaged Goods industry. To learn more about Clorox Co stock, you can check out its 30-Year Financials here.
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