Clorox Co (CLX, Financial) has experienced a daily decline of -1.54% and a 3-month loss of -9.98%. Despite the fluctuations, the company's Earnings Per Share (EPS) stands at $0.68. Investors are keen to understand if these figures point to Clorox Co being modestly undervalued. This article delves into a valuation analysis to answer this pressing question and encourages readers to explore the comprehensive financial assessment that follows.
Company Introduction
Clorox Co, with a storied history exceeding 100 years, has diversified its portfolio to include a range of consumer products from cleaning supplies to natural personal-care products. The company, known for its flagship Clorox brand, also owns other household names like Pine-Sol and Brita. Notably, approximately 85% of its sales are generated within the United States. Currently, Clorox Co's stock price is $137.03, with a market capitalization of $17 billion. When compared to the GF Value of $154.28, it appears that Clorox Co may be modestly undervalued, offering a potential opportunity for investors.
Summarize GF Value
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It is calculated based on historical trading multiples, an adjustment factor from GuruFocus that considers past returns and growth, and future business performance forecasts. When a stock's price significantly deviates from the GF Value Line, it suggests a potential overvaluation or undervaluation, influencing the expected future returns. Clorox Co's current price suggests that the stock is modestly undervalued, implying a likelihood of higher long-term returns compared to its business growth.
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Financial Strength
Investing in companies with robust financial strength is essential to minimize the risk of capital loss. Clorox Co's cash-to-debt ratio of 0.16 places it in a less favorable position than 71.45% of its industry peers. With a financial strength rating of 5 out of 10, Clorox Co's financial health is deemed fair, warranting a closer examination of its debt and cash flow over the years.
Profitability and Growth
Clorox Co's consistent profitability over the last decade underscores its reduced risk profile. The company's operating margin of 10.14% outperforms 72.91% of competitors within the Consumer Packaged Goods industry, reflecting a strong profitability rank. However, growth remains a concern, with the 3-year average annual revenue growth standing at 4.2%, which is lower than industry norms. Moreover, the 3-year average EBITDA growth rate of -26.6% places Clorox Co in a less favorable position relative to the industry.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) provides insight into Clorox Co's efficiency in generating cash flow relative to its capital investment. Clorox Co's ROIC of 10.23 exceeds its WACC of 6.24, indicating effective capital utilization. The historical comparison of ROIC and WACC is depicted below, offering a glimpse into the company's financial performance over time.
Conclusion
In conclusion, Clorox Co (CLX, Financial) appears to be modestly undervalued. The company's fair financial condition and strong profitability are promising, though its growth challenges cannot be overlooked. Investors seeking to understand Clorox Co's stock in greater depth can review 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.
