Church & Dwight Co (CHD): Assessing Its Market Value

Is Church & Dwight Co (CHD) Priced Fairly in the Market? A Comprehensive Guide

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With Church & Dwight Co Inc (CHD, Financial) experiencing a daily loss of 1.3% and a slight 3-month decline of 0.63%, investors are keenly observing the stock's performance. The company's Earnings Per Share (EPS) stands at 1.74, raising the question: Is Church & Dwight Co fairly valued at its current market price? This article delves into a meticulous valuation analysis to provide an answer and invites readers to explore the financial nuances that define the company's market standing.

Company Overview

Church & Dwight Co Inc, with a market cap of $23.50 billion and sales of $5.80 billion, is a global powerhouse in the production of baking soda and a plethora of other household and personal care products. The company's Arm & Hammer brand extends into laundry products, cat litter, oral care, deodorant, and nasal care, contributing to more than 80% of its annual sales and profits. With the acquisition of Flawless in early 2019 and Zicam at the end of 2020, Church & Dwight Co continues to expand its impressive portfolio. The majority of its sales stem from the U.S. market. When compared to the GF Value of $100.42, Church & Dwight Co's current stock price of $95.37 suggests the stock might be trading at a fair value.

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Understanding GF Value

The GF Value is a proprietary metric used to determine the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance projections. The GF Value Line provides a benchmark for the fair trading value of a stock. If a stock's price significantly exceeds this line, it may be overvalued with potentially poor future returns. Conversely, a price well below the GF Value Line could indicate an undervalued stock with prospects for higher future returns.

Church & Dwight Co (CHD, Financial) appears fairly valued according to the GuruFocus valuation method. The stock's fair value is estimated by considering historical trading multiples, an internal adjustment based on past business growth, and future business performance projections. Currently, at a price of $95.37 per share, Church & Dwight Co's stock seems to be trading at its intrinsic value.

Because Church & Dwight Co is fairly valued, the long-term return of its stock is likely to align closely with the rate of its business growth.

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Financial Strength

When considering an investment, it's crucial to evaluate a company's financial strength to avoid the risk of permanent capital loss. Church & Dwight Co's cash-to-debt ratio of 0.24 ranks below the industry median, positioning its financial strength at a GuruFocus rating of 7 out of 10, indicating a fair balance sheet.

Profitability and Growth

A company's long-term profitability, as reflected by consistent profits and high profit margins, is a less risky prospect for investors. Church & Dwight Co has maintained profitability for the past decade, boasting an operating margin of 11.13%, which is commendable within the Consumer Packaged Goods industry. Its profitability rank is a robust 9 out of 10.

Growth is also a pivotal valuation factor, as companies that expand swiftly tend to generate more shareholder value, particularly when the growth is profitable. Church & Dwight Co's average annual revenue growth is 8.1%, outpacing more than half of its industry peers. However, its 3-year average EBITDA growth rate is a concern, trailing behind the majority of the industry.

ROIC vs. WACC

Assessing a company's value creation can be done by comparing its Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC). Church & Dwight Co's ROIC over the past 12 months is 7.31, slightly above its WACC of 6.71, indicating the company is generating adequate returns on its investments.

Conclusion

In conclusion, Church & Dwight Co Inc (CHD, Financial) presents as fairly valued, with a solid financial condition and strong profitability. Despite its growth ranking below the industry average, the company's stock remains a considerable contender in the market. For a deeper understanding of Church & Dwight Co's financials, investors are encouraged to review the 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.

Disclosures

I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.