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Clorox Stock Rose on Strong Fiscal 4Q17 Results

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Part 7
Clorox Stock Rose on Strong Fiscal 4Q17 Results PART 7 OF 7

Clorox’s Current Valuation versus Its Industry Peers

Valuation summary

On August 3, 2017, Clorox (CLX) stock was trading at a 12-month forward PE (price-to-earnings) multiple of 23.7x. The company’s valuation multiple is higher than most of its peers, excluding Church & Dwight (CHD), as shown in the graph below. 

Clorox’s current valuation multiple is greater than the S&P 500 (SPX-INDEX), which was trading at a multiple of 18.2x on the same day.

Clorox’s Current Valuation versus Its Industry Peers

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Clorox’s valuation multiple is higher than the peer group average of 22.7x. On August 3, 2017, Procter & Gamble (PG), Kimberly-Clark (KMB), Colgate-Palmolive (CL), and Church & Dwight were trading at forward PE ratios of 19.2x, 21.8x, 23.9x, and 25.8x, respectively.

The 12-month forward PE ratio differs among the companies based on numerous parameters. These parameters include the company’s capital structure, growth expectations, and profitability. 

Growth expectations

Clorox’s management expects to generate healthy top-line and bottom-line growth in fiscal 2018. Clorox projects its sales to improve in the range of 2%–4%, driven by new product launches and higher pricing. However, an unfavorable mix, moderating category growth, and higher sales promotional spend could restrict its top-line growth. Analysts expect the company to mark 3.1% growth in its fiscal 2018 revenues.

On the EPS (earnings per share) front, Clorox sees 3%–7% growth in fiscal 2018. Increased piecing, rising volumes, and cost-saving measures are likely to drive the company’s bottom-line growth. However, inflation in commodity prices, increased competition, and higher manufacturing and logistics costs are expected to remain a drag on its growth. Analysts project a 6.6% rise in its fiscal 2018 bottom-line growth.

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