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Colgate-Palmolive Stock: Is a Pullback around the Corner?

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Jun. 19 2019, Published 11:25 a.m. ET

CL stock outpaces broader markets

Colgate-Palmolive (CL) stock has gained substantially this year, outperforming broader markets. The stock has risen 23.3%, while the S&P 500 has risen 15.3%.

Organic sales growth and better-than-expected financials boosted CL stock. These factors have also supported Procter & Gamble (PG), Kimberly-Clark (KMB), and Church & Dwight (CHD), which have risen 20.7%, 20.4%, and 17.6%, respectively, this year.

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Valuation a concern

While Colgate-Palmolive’s organic sales growth and earnings in the past couple of quarters have been impressive, its high valuation and persistent sales and margin headwinds indicate a pullback.

Colgate-Palmolive stock trades at 25.9 times its 2019 estimated EPS of $2.83, 24.2 times its 2020 estimated EPS of $3.03, and at a 12% premium to its four-year average multiple of 23.4x. These figures make the stock seem expensive based on the company’s projected EPS decline of 4.6% in 2019 and ~7% EPS growth in 2020.

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