As you know I was quite bearish on Clorox in my previous posts (here and there). Now shares are traded significantly lower with drawdown from the top of around 15%. Well, if you look at KMB chart it is quite similar pattern to CLX. Let’s see whether it is a right time to buy.

Results for Q1 weren’t very good in my opinion:

image001

EBIT margin decreased and EPS is up only by 3%. Though cash flow is good (as always).

Below outlook for FY17 is presented:

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EPS is to grow decently – this should positively impact dividends. Valuation (next year consensus):

EV/EBITDA = 12.5

P/E = 20

Dividend yield 3%

Well, still not cheap, but it is getting neutral for me.

When looking at dividend yield it is important to look at other comparable companies:

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We can see that KO/PG/KMB are paying significantly higher dividend yield (buybacks should be compared as well).

 

Summing up, Clorox is a high quality stable business, which share price dropped by 15% from the top. Valuation is still not occasional, but is getting acceptable. When sentiment to consumer companies change (see KMB, PG) then there is a potential for increase of CLX. For now still neutral (I am not bearish anymore, but I would not buy shares at this level, I am looking for special occasions).

 

Disclosure CLX – no position