Clorox (NYSE:CLX) is a stock that any investor would like to own. The company sells well-known brands such as Clorox, Burt's Bees, Kingsford, Brita, and others. The company is positioned with a strong product portfolio as its number 1 and 2 brands represent nearly 90% of its portfolio. Selling consumer staple products gives CLX the stability in financial results even during economic recessions. To that end, the company is a cash flow machine and has delivered 13% of sales as free cash flow over the last 10 years.
The financial stability of the company's results and strong portfolio of brands is loved by investors and that is seen in the valuations. The stock is fairly valued on all three of the metrics which suggests that the stock is valued to perfection and the upside here is very minimal.
To get an idea of the value of the company we can also look at any M&A discussions. Notably, the company was part of a takeover battle with Carl Icahn last year as he was trying to buy out the company. His best offer was for $80/share of the company, which is upside of about 15% from current prices. That is consistent with the valuation metrics and suggests that the upside here is limited. Below is an in depth look at the valuation metrics and stock chart.
Valuation: Clorox's trailing 5 year valuation metrics suggest that the stock is fairly valued as all of the metrics are close to their respective 5 year averages. Clorox's current P/S ratio is 1.7 and it has averaged 1.7 over the past 5 years with a high of 1.9 and low of 1.3. Clorox's current P/E ratio is 16.9 and it has averaged 16.5 over the past 5 years with a high of 19.6 and low of 13.9.
Price Target: The consensus price target for the analysts who follow Clorox is $70. That is upside of less than 1% from today's stock price of $69.39 and suggests that the stock is fairly valued these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: Clorox is currently trading at about $69 a share with analysts expecting EPS of $4.38 next year, an earnings increase of 8% y/y, for a forward P/E ratio of 15.8. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Colgate-Palmolive (NYSE:CL) is currently trading at about $98 a share with analysts expecting EPS of $5.91 next year, an earnings increase of 9% y/y, for a forward P/E ratio of 16.6. Procter & Gamble (NYSE:PG) is currently trading at about $67 a share with analysts expecting EPS of $4.29 next year, an earnings increase of 8% y/y, for a forward P/E ratio of 15.6. Kimberly-Clark (NYSE:KMB) is currently trading at about $78 a share with analysts expecting EPS of $5.53 next year, an earnings increase of 8% y/y, for a forward P/E ratio of 14.1. The mean forward P/E of Clorox's competitors is 15.5 which suggests that Clorox is fairly valued relative to its publicly traded competitors.
Earnings Estimates: Clorox has beat EPS estimates 3 times in the past 4 quarters. The company's EPS figures have come in between -2 cents and 11 cents from consensus estimates or about -1.9% to 16.2% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Price Action: Clorox is down 0.7% over the past year, underperforming the S&P 500, which is up 5%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $68 and above its 200 day moving average, which sits at $66.60.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.