Friday was a great day for Clorox Company investors, who saw their shares rise 5.6% to a price of $156.36 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
Clorox Company Has Elevated P/B and P/E Ratios:
The Clorox Company manufactures and markets consumer and professional products worldwide. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, Clorox Company has a trailing 12 month P/E ratio of 248.2 and a P/B ratio of 366.18.
Clorox Company's PEG ratio is 4.54, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Increasing Revenues but Narrowing Margins:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $6,124 | $6,214 | $6,721 | $7,341 | $7,107 | $7,389 |
| Revenue Growth | n/a | 1.47% | 8.16% | 9.22% | -3.19% | 3.97% |
| Gross Margins | 44% | 44% | 46% | 44% | 36% | 39% |
| Net Margins | 13% | 13% | 14% | 10% | 7% | 2% |
| Net Income (MM) | $823 | $820 | $939 | $710 | $462 | $161 |
| Net Interest Expense (MM) | $85 | $97 | $99 | $99 | $106 | $90 |
| Depreciation & Amort. (MM) | $166 | $180 | $180 | $211 | $224 | $236 |
| Earnings Per Share | $6.26 | $6.32 | $7.36 | $5.58 | $3.73 | $1.2 |
| EPS Growth | n/a | 0.96% | 16.46% | -24.18% | -33.15% | -67.83% |
| Diluted Shares (MM) | 130 | 127 | 128 | 124 | 124 | 125 |
| Free Cash Flow (MM) | $782 | $786 | $1,292 | $945 | $535 | $930 |
| Capital Expenditures (MM) | $194 | $206 | $254 | $331 | $251 | $228 |
| Current Ratio | 1.15 | 0.86 | 1.21 | 0.67 | 0.86 | 0.86 |
| Total Debt (MM) | $2,284 | $2,683 | $3,418 | $3,084 | $2,474 | $2,477 |
Clorox Company has rapidly growing revenues and a flat capital expenditure trend, wider gross margins than its peer group, and generally positive cash flows. However, the firm suffers from declining EPS growth and not enough current assets to cover current liabilities. Finally, we note that Clorox Company has decent net margins with a negative growth trend.
