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Clorox: Cleaning The Portfolio

May 05, 2020 2:29 PM ETThe Clorox Company (CLX)7 Comments


  • Clorox has seen very strong momentum as the full year guidance implies that the biggest jump in sales might already be behind us.
  • I like the operating leverage displayed and while Clorox is undeniably a long-term value creator, its valuation is sky-high.
  • Following a big move higher in recent months, valuations have become far too steep from me to create a compelling risk-reward.
  • Looking for more stock ideas like this one? Get them exclusively at Value In Corporate Events. Get started today »

Clorox (NYSE:CLX) has been one of the few and significant winners in this environment. Shares have traded around the $150 mark for years and actually traded around that level at the start of the year, although the developments surrounding the global outbreak of COVID-19 pushed shares up to a high of $200 in recent days. Despite the quality, one-time hoarding effect and potentially a continued contribution of increased hygiene consciousness, current prices reflect far too much optimism to create real appeal.

The Business

Clorox is a conglomerate which generates over $6 billion in sales from four major categories. Clorox is best known for its cleaning products which make up a third of sales including subcategories such as home care, laundry and professional products.

Household products make up 30% of sales from bags, charcoal and cat litter, among others. Lifestyle products generate a fifth of sales as the international segment adds about a sixth to total revenues. Besides the namesake brand, Clorox claims that 80% of its portfolio is comprised out of number 1 and 2 brands in their respective categories. The company deliberately focuses on leading brands in less crowded and more niche market segments such as water filtration, wipes, premium trash and bleach, as a significant portion of its products are in great demand given the circumstances.

The company seems quite proactive to the changes taking place in its marketplace as well, placing a real emphasis on data & analytics, change in retail, rising consumer expectations and focus on cost and competition.

The Numbers

Note that Clorox has a broken book year with the year ending in June of the calendar year. In August of last year, the company reported full year sales of $6.2 billion, a 1.5% increase in sales. The quality of this growth is lackluster with the acquisition of Nutranext

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This article was written by

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Finding value that gets unlocked in M&A, IPOs and other corporate events
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

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