Church & Dwight Co Inc (CHD, Financial) recently experienced a daily loss of -6.62% and a 3-month loss of -10.1%. Despite this, the company reported an impressive Earnings Per Share (EPS) (EPS) of 1.79. This raises a critical question: Is Church & Dwight Co (CHD) modestly undervalued? This article provides a comprehensive valuation analysis of Church & Dwight Co, aiming to answer this question.
A Brief Overview of Church & Dwight Co
Church & Dwight Co Inc (CHD, Financial) is a global leader in the production of baking soda. Its diverse product portfolio includes laundry products, cat litter, oral care, deodorant, and nasal care, sold under the Arm & Hammer brand. Other notable brands in its portfolio include Xtra, Trojan, OxiClean, First Response, Nair, L'il Critters/Vitafusion, Orajel, and WaterPik. In 2019, the company added Flawless, a manufacturer of electric shaving products for women. By the end of 2020, Church & Dwight Co had acquired Zicam, a leading brand in the cough/cold-shortening category. The company generates over 80% of its sales from the U.S. market.
The GF Value of Church & Dwight Co
The GF Value is a proprietary measure that estimates the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and vice versa.
According to GuruFocus' valuation method, Church & Dwight Co (CHD, Financial) appears to be modestly undervalued. The current share price is $85.88, which is significantly below the GF Value of $101.76. Thus, the long-term return of Church & Dwight Co's stock is likely to be higher than its business growth.
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Financial Strength and Profitability of Church & Dwight Co
Investing in companies with poor financial strength can lead to a higher risk of permanent loss. Church & Dwight Co has a cash-to-debt ratio of 0.17, which is worse than 70.13% of 1801 companies in the Consumer Packaged Goods industry. However, its overall financial strength is 7 out of 10, indicating fair financial stability.
Investing in profitable companies carries less risk. Church & Dwight Co has been profitable for 10 years over the past 10 years. It had revenues of $5.60 billion and Earnings Per Share (EPS) of $1.79 in the past 12 months. Its operating margin of 11.37% is better than 77.11% of 1839 companies in the Consumer Packaged Goods industry. Overall, GuruFocus ranks Church & Dwight Co's profitability as strong.
Growth of Church & Dwight Co
Company growth is a critical factor in valuation. According to GuruFocus research, companies that grow faster create more value for shareholders. The average annual revenue growth of Church & Dwight Co is 8.1%, which ranks better than 54.89% of 1718 companies in the Consumer Packaged Goods industry. However, its 3-year average EBITDA growth is -6%, which ranks worse than 70.44% of 1529 companies in the same industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Church & Dwight Co's ROIC was 7.35, while its WACC was 6.97.
Conclusion
In conclusion, Church & Dwight Co's stock appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 70.44% of 1529 companies in the Consumer Packaged Goods industry. For more detailed financial information about Church & Dwight Co, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
