It’s been a while since I’ve produced a stock analysis! I will make sure to share more in the upcoming weeks. If you have any suggestions, please send me an email!
Clorox (CLX) Business Description:
The Clorox Company (Clorox) is a manufacturer and marketer of consumer and professional products. The Company operates four divisions: Cleaning (famous Pinsol!), Household (such as bags & wraps… Glad anyone?), Lifestyle (such as dressing & sauces) and International (to cover sales for the above three divisions outside the US of A). As you can see, their revenues are pretty well spread among the four divisions:
However, I’m surprised to see that the international portion only represents 22% of Clorox’s revenues. Clorox usually sells its products through retail businesses such as grocery stores, merchandisers and medical supply providers.
In June 2012, the company bought HeathLink and Aplicare, two companies evolving around infection control products. Clorox also bought Soy Vay Enterprises concentrated in Asian marinades and dressings (I hope they don’t mix both acquisitions!).
Clorox is a well-diversified company manufacturing goods in a dozen countries and selling them in more than 100 countries. Its organic sales growth trends around 3 to 5% (4% for quarter ending June 30th 2012) and its main strategy to improve market share seems to be through acquisition.
Clorox is putting a lot of emphasis on a sustainable business model with green products (that’s always a challenge for the cleaning industry) and aims to be a socially responsible employer (giving the breakdown for male/female/minority employees/managers in their company). They also track sustainability goals in term of GHG, Energy, Water and Waste management. Clorox is definitely taking a step ahead of other companies in general with the tracking of these metrics.
CLX is among “giant companies” racking $5.5 billion in sales last year. Clorox’s competitors are also part of the big leagues: Procter & Gamble (PG), Colgate Palmolive (CL) & Kimberly-Clark (KMB).
CLX Stock Graph
CLX Dividend Growth Graph
CLX dividend growth has been quite interesting since 2007. It went from $0.31/share to $0.64/share in only 5 years. It’s annualized dividend growth for the past five years is 13.25%.
Company Ratios and Financial Info:
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Dividend Metrics
Current Dividend Yield 3.51
5 year Dividend Growth 13.25
1 year Dividend Growth 8.44
Company Metrics
Sales Growth (1 year) 4.53
Sales Growth (5 year) 2.91
EPS growth (5 year) 4.44
P/E ratio 17.22
P/E Next Year 15.82
Margins growth -0.47
Payout ratio 58.8
Debt to Capital Ratio 0.29
The P/E ratio (17.22) and Forward P/E ratio (15.82) show that Clorox is not a huge bargain at $74. On the other hand, CLX major competitors show higher P/E ratios: PG 22.21, KMB 19.10 and CL at 21.49.
The problem with mature companies is that you won’t find huge growth anywhere. Sales growth over the past 5 years has been 2.91% while the earnings per share is at 4.44%. There is obvious pressure on the margin from competitors and this is why this metric is going nowhere (currently -0.47%). Considering that the US has gone through some rough economic times since 2007, we can say that CLX is able to find ways to keep growing in a hostile environment.
On a more positive note, the company has clearly taken a stand in terms of dividend growth. CLX is already a dividend champion (increasing its dividend for 25 consecutive years) but aggressively increased its dividend for the past 5 years. At this current rate (13.25%), Clorox will double its dividend every 5.5 years which is a pretty good standing in the dividend world. Clorox is clearly using their dividend growth as a “marketing tool” to attract investors. When it’s time to talk about performance in their financial statements of 2011, they used two mentions: $2.7 billion returned to stockholders + 100% dividend increase (both over the past 5 years). Their current payout ratio (58%) leads me to think that CLX has a lot of room to continue increasing its dividend over time. However, considering slow sales growth, I don’t expect the future dividend increases to be as aggressive.
If you are looking for more graphs and financial info, Clorox has the brilliant idea to offer an investor fact sheet for free. You can download it here (PDF format). Since CLX is a mature company, you won’t be surprised to see most trends from 2009 to 2012 as fairly stable. While the free cash flow is on a downtrend, I’m very happy to see diluted net earnings per share going up for 4 consecutive years.
CLX Stock Technical Analysis
CLX is currently trading on a strong uptrend. It might be a good time to acquire this stock. Click here to get a free stock analysis report on CLX.
Clorox upcoming opportunities and dangers:
Clorox’s biggest divisions include its cleaning products. I think it could be a good very place to have your strength as people are getting more and more obsessed by germs and infections. As the population ages, this will become an even bigger issue in hospitals and long term care facilities.
There is one thing I don’t like about Clorox though; 78% of its revenues are coming from the USA. CLX has several “day-to-day” products that consumers buy regardless of the economy. This prevents them from being overly affected by an American recession. Nevertheless, I would have expected better revenues generated from the international branch.
When you look at the most recent financial statements, you will see that international earnings are up 116% compared to last year. This convinces me that Clorox can become a fierce competitor outside its primary playground. The cleaning and household divisions are stable with 7% increased earnings. I think that the future of CLX is definitely in the cleaning industry but it will have to be able to “export” its strength outside of the US to find more interesting growth.
Final Thoughts on Clorox
When I look at the numbers, I think CLX is definitely a good dividend growth stock to hold in a portfolio. It shows great diversification along with stable growth. I intend to review its competitors in the upcoming weeks but the fact that CLX is trading at a lower P/E ratio makes me think that CLX may be the best pick in this industry. But I won’t make the call yet, I have take a look at PG, KMB & CL first!
What do you think? Is CLX part of your portfolio?
Disclaimer: I do not hold a CLX position
CVX looks good from what you put here, but the PE seems high to me. I need to research a bit more.
Was the date bleached or white washed? LOL
Just a short comment on Clorox. In looking at the income statement for CVX a little further there is something interesting. The net income for 2011 from continuing operations has eroded significantly. The reason overall net income has not reduced significantly is that there is a sale of a discontinuing operation that keeps the net income around the same levels as 2010 and 2009. Are you at all concerned about the significant portion of income in 2011 coming from the sale of a discontinuing operation?
Nathan
right now I’m sticking with CDN stocks, I realize that there is less diversification but it keeps my portfolio simple and I’m not spread out too far.
A yield of 3.5% and solid dividend growth. Looks good to me.