When I look at shares price performance over last weeks I am wondering was there any Brexit at all? On average dividend aristocrats are 25% above my investable level and I think it is hard to find some good opportunities on the market. I decided to go to my trading page, where I can look on performance of different aristocrats over some periods of time. I found that over the last week Clorox is the weakest performer and I thought maybe it didn’t rebound after Brexit and it might be some opportunity. Imagine how surprised I was when I found that on 24th of June shares of Clorox raised significantly! I looked at company in March (read more) at I found it expensive and now it is even more expensive…
What’s happened and how is business going?
First of all we should remember that Clorox is a defensive business with very stable profits. This is why in case of turmoil investors prefer such companies and this is why demand on Clorox shares were high. Secondly think about Clorox business – can it really be affected by Brexit? Maybe at the end of the day some currency issues will be negative, but generally I see no reason for business to deteriorate.
Company increased guidance for 2016, which is definitely a good news:
Clorox updated its financial outlook for fiscal year 2016, which includes the impact of the announced acquisition of digestive health company Renew Life:
- 1% to 2% sales growth, or 4% to 5% currency-neutral (previously flat to 1% growth, 3% to 4% currency neutral)
- About 50 basis points of EBIT margin expansion (previously 50-75 basis points)
- $4.85to $4.95 diluted EPS (previously $4.75 to $4.90)
Nevertheless current valuation with P/E = 27.7, EV/EBITDA = 16 and dividend yield 2.25% is still way too high. I definitely prefer Procter & Gamble.
Summing up I do not change my opinion, Clorox is a high quality stable business, but currently in my opinion investors are paying too much for shares – I think I will reconsider buying on some big sell-off. I will reconsider company at $100.
Disclosure CLX – no position