Clorox’s (CLX) sustained momentum in sales and margin expansion has impressed. However, an expected slowdown in sales and pressure on earnings from higher costs make Clorox stock unattractive on the valuation front.
Clorox stock trades at 23.0x its fiscal 2020 estimated EPS of $6.72—which looks expensive, given the projected growth of about 6% in that period. Analysts expect Clorox’s top line to gain from innovation. However, its sales growth rate is expected to decelerate as the company annualizes its Nutranext acquisition. Also, weakness in the Household segment and currency volatility are likely to hurt.
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Among the 18 analysts covering Clorox stock, nine say “hold.” Meanwhile, five say “sell” and four say “buy.” Analysts have a consensus target price of $153 per share on Clorox, which is almost at par with its closing price on April 24.
On April 8, J.P. Morgan downgraded Clorox (CLX) stock from “neutral” to “underweight,” citing challenges in its Bags and Wraps and Charcoal businesses.
In comparison, Wall Street also maintains a “neutral” view on other major CPG stocks—including Procter & Gamble (PG), Church & Dwight (CHD), Colgate-Palmolive (CL), and Kimberly-Clark (KMB). Continued pressure on margins, heightened competitive activity in the value segment, and little to no boost from a low tax rate are likely to limit the upside in these stocks.