Colgate-Palmolive Co stock gives any indication that it is modestly overvalued


– By GF value

The Colgate-Palmolive Co stock (NYSE: CL, 30-year finances) is estimated to be slightly overvalued, according to the GuruFocus value calculation. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, past business growth, and analysts’ estimates of future business performance. If a share’s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 83.9 per share and market cap of $ 71 billion, Colgate-Palmolive Co stock is showing all signs of modest overvaluation. The GF value for Colgate-Palmolive Co is shown in the table below.

Colgate-Palmolive Co stock gives any indication that it is modestly overvalued

Given that Colgate-Palmolive Co is relatively overvalued, its long-term stock return is likely to be lower than its business growth, which has averaged 3.3% over the past three years and is expected to grow by 1 , 56% per year over the next three to five years. years.

Connect: These companies can offer higher future returns with reduced risk.

Companies with poor financial strength present investors with a high risk of permanent capital loss. To avoid a permanent loss of capital, an investor should do his research and consider the financial strength of a company before deciding to buy stocks. A company’s cash-to-debt ratio and interest coverage are both a great way to understand its financial strength. Colgate-Palmolive Co has a cash-to-debt ratio of 0.13, which ranks lower than 77% of companies in the consumer packaged goods industry. The overall financial strength of Colgate-Palmolive Co is 5 out of 10, which indicates that the financial strength of Colgate-Palmolive Co is fair. Here is Colgate-Palmolive Co’s debt and cash flow for the past several years:

Investing in profitable businesses carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a business with high profit margins offers better performance potential than a business with low profit margins. Colgate-Palmolive Co has been profitable 10 years in the past 10 years. In the past 12 months, the company reported sales of $ 16.7 billion and earnings of $ 3.1 per share. Its operating margin of 23.49% higher than 94% of companies in the consumer packaged goods industry. Overall, GuruFocus ranks Colgate-Palmolive Co’s profitability as strong. Here is Colgate-Palmolive Co’s sales and net income for the past few years:

Colgate-Palmolive Co stock gives any indication that it is modestly overvalued

Colgate-Palmolive Co stock gives any indication that it is modestly overvalued

Growth is probably one of the most important factors in the valuation of a business. GuruFocus research has found that growth is closely tied to the long-term performance of a company’s stocks. If a company’s business is growing, the business typically creates value for its shareholders, especially if the growth is profitable. Likewise, if the income and profits of a business decrease, the value of the business will decrease. Colgate-Palmolive Co’s Average revenue growth rate over 3 years is in the mid-range of companies in the consumer packaged goods industry. Colgate-Palmolive Co’s 3-year average EBITDA growth rate is 3.1%, which is in line with the average for companies in the consumer packaged goods industry.

A company’s profitability can also be assessed by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures the extent to which a business generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all of its security holders to fund its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely to create value for its shareholders. In the past 12 months, Colgate-Palmolive Co’s ROIC is 26.01 while its WACC is 4.91. Colgate-Palmolive Co’s historical ROIC vs WACC comparison is shown below:

Colgate-Palmolive Co stock gives any indication that it is modestly overvalued

Colgate-Palmolive Co stock gives any indication that it is modestly overvalued

In conclusion, The stock of Colgate-Palmolive Co (NYSE: CL, 30-year financial statements) is estimated to be slightly overvalued. The company’s financial position is fair and its profitability is solid. Its growth is in the mid-range of companies in the consumer packaged goods industry. To learn more about Colgate-Palmolive Co stock, you can view its 30-year financial data here.

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This article first appeared on GuruFocus.

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