Clorox’s Current Valuation versus Its Industry Peers
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.
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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.
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.