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What Could Limit Upside for Church & Dwight Stock?


Dec. 4 2020, Updated 10:53 a.m. ET

CHD to sustain momentum

Church & Dwight (CHD) outperformed bigger rivals including Procter & Gamble (PG), Kimberly-Clark (KMB), Clorox (CLX), and Colgate-Palmolive (CL) with its sales and earnings growth rate in 2018. We expect Church & Dwight to sustain momentum in 2019 and report higher sales and earnings growth than peers.

We expect Church & Dwight’s organic sales to improve due to growth in volumes owing to its focus on innovation, a favorable mix, and higher pricing. Meanwhile, the expansion of the export business is likely to support its top line. Church & Dwight’s adjusted EPS are expected to grow at a high-single-digit rate in 2019 driven by improvement in organic sales.

The company’s sales and EPS growth are expected to decelerate slightly in 2019 as sales and EPS in 2018 benefitted from incremental sales from its acquisitions and a lower adjusted effective tax rate.

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Valuation to restrict the upside

Analysts have a consensus target price of $64.50 per share on CHD stock, which implies a downside of 2.1% in its stock based on the closing price of $65.89 on March 4. Analysts expect CHD to perform better than most of its peers in 2019. However, CHD stock’s high valuation keeps analysts on the sidelines.

CHD stock trades at 26.8x its 2019 estimated EPS of $2.46, which looks expensive given the projected growth rate of 8.4% in that period. Among the analysts covering CHD stock, 13 analysts recommend a “hold,” six analysts suggest a “buy,” and two analysts have a “sell.”


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