Clorox (CLX) Stock Analysis

by | Dividend Aristocrats, Dividend Champions

Clorox Logo

Clorox Dividend

Sector: Consumer Defensive

Industry: Household & Personal Products

The Clorox (CLX) dividend has been paid continuously since 1968 and increased for 44 consecutive years; qualifying the company as a Dividend Aristocrat and Dividend Champion.

Clorox has a large moat due to its brands and cost advantages. This is demonstrated by the fact the vast majority of their sales come from brands ranked #1 or #2.

Current Dividend Annualized: $4.64

Clorox (CLX) Intrinsic Value – Margin of Safety Analysis            

(updated November 2021)

Normalized Diluted Earnings Per Share (TTM):  $3.50
Cash Flow From Operations Per Share (TTM): $7.41
Free Cash Flow Per Share (TTM):  $4.92

Estimated Intrinsic Value: $121

Target Buy Price Based on Required Margin of Safety =  $110
(Required Margin of Safety Based On Risk Stability Grade:

A = 10%, B = 20%, C = 30%, D = 40%, F = 50%)

Target SELL Price Based on Estimated Intrinsic Value = $146
(Allow Overvaluation Adjusted by Risk Stability Grade:

A = 20%, B = 15%, C = 10%, D = 5%, F = 0%)

 

Risk / Stability Grade: A

A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.

B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.

C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.

D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.

F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.

 

Financial Risk Grade: A

A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.

B grade indicates a very low probability for a dividend cut.

C grade indicates a low probability for a dividend cut and/or average safety risk.

D grade indicates there are issues that should be considered concerning future dividend payments.

F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.

 

Business Quality Grade: A

A grade indicates earnings quality is high or far above average.

B grade indicates earnings quality is good and/or above average.

C grade indicates earnings quality is acceptable or average.

D grade indicates earnings quality is poor and requires thoughtful due diligence.

F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.

Earnings Report:  9/30/21

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AAAMP Portfolios Position Disclosures:
Dividend Growth & Income – None
Treasure Trove Twelve – None
Global Dividend Balanced – None
Global Value – None
Global Value Aggressive – None
High Yield – None

 Company Description

Sector: Consumer Defensive
Industry: Household & Personal Products

With a history dating back more than 100 years, Clorox now sells a variety of consumer staples products, including cleaning supplies, laundry detergents, trash bags, cat litter, charcoal, food dressings, water-filtration products, and natural personal-care products.

Beyond its namesake brand, the firm’s portfolio includes Liquid-Plumr, Pine-Sol, SOS, Tilex, Green Works, Kingsford, Fresh Step, Glad, Hidden Valley, KC Masterpiece, Brita, and Burt’s Bees. Nearly 85% of Clorox’s sales stem from its home turf.

SWOT Analysis

Strengths

Clorox has significant competitive advantages including strong brands, economies of scale, outstanding management, an adapting product line, and barriers to entry. Economies of scale allow Clorox to keep margins above average. Profitable long term relationships with retailers translates into loyalty and prime shelf space that makes it harder for competitors to grab market share.

Weaknesses

The household and personal products industries are mature markets with a great deal of competition. Low growth rates make it difficult to grow earnings without adding new products through innovation or acquisition.

Nearly 50% of Clorox business is derived from five retailers including approximately 25% coming from Wal-Mart alone. This means the company has limited pricing power because retailers are squeezing suppliers for lower prices in this competitive environment.

Opportunities

Clorox is bringing new products to market that are considered value-added as well as extensions to current product lines. New Bert’s Bees Face and Body products, Control Bleach Crystals, Pump N’ Clean Products, Light Weight Charcoal, OderShield and Force Flex bags, ScrubSingles, Triple Action Dust Wipes, Urine Remover, and Clorox Pool Products are examples of how Clorox is using opportunities to grow revenues.

Acquisitions provide additional sales channels that while still remaining true to their core businesses. The objective is to invest in markets that provide higher growth potential.

Threats

A major threat is private label growth as retail customers become more savvy shoppers and price conscious. The competitive environment allows for retailers to ask for lower prices and consumers to trade down to cheaper alternatives.

Clorox Products
Clorox Bleach
Clorox Scrub Singles
Clorox Wipes

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Disclaimer:
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.

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