Church & Dwight: Brand Portfolio Looks Great, But Valuation Doesn't

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Summary

  • CHD is an attractive business with excellent, diverse brands, which it manages effectively.
  • Church & Dwight's fundamental financial performance outperforms consumer peers in many regards.
  • Despite this, valuation is running ahead of its projected growth, leaving a fair value around $80 to $84.

Creative Commons image reproduced from Flickr user jeepersmedia.

Church & Dwight (NYSE:CHD) is, of course, a familiar consumer goods name. Through its popular Arm & Hammer brand it is represented in toothpastes, detergents, pet products, paints, baking soda, and more. Indeed, according to the company, an Arm & Hammer product can be found in 86% of US homes. Amazing.

However, Church & Dwight is much more than just Arm & Hammer. Its brand portfolio has impressive variety.

Stunning Brand Variety

Its leading "Power Brands" cover a number of attractive areas:

Of these Power Brands, the company sets aside four as "Mega Brands": Arm & Hammer, OxiClean, Trojan and Vitamins (which covers both L'il Critters and VitaFusion). As a result, their business is stretched across a wide variety of products. From cat litter to cleaning products, condoms to supplements, quite a reach — and very attractive to an investor.

Superb Brand Stewardship

Many of these brands have been added to the company's portfolio in recent years. Since acquiring them, it has proven itself incredibly adept at expanding these brands' market share (year acquired in parentheses):

In recent years it has continued this acquisition program. In 2011 it bought Batiste dry shampoo and have since made it the number one dry shampoo in the US as well as the UK.

The company has also made solid moves into the international market:

However, it remains heavily exposed to the US economy with only a modest proportion coming from outside the US. This has improved, but remains very low. Tellingly, this also leaves them exposed to customer risk:

A quarter of its entire revenues are derived from sales from Wal-Mart. Fortunately, after that it appears the revenue spread is a bit more diverse. But it is something to bear in mind.

Generally, revenues grew well across segments except in the consumer international one:

This article was written by

Dividend Drive profile picture
2.27K Followers
A UK-based investor focusing on analysing and investing in attractive high quality, cash-generative businesses with strong dividend growth prospects.

Disclosure: I am/we are long UL, PG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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