On 27th of January Colgate-Palmolive presented financial results for Q4 2016. Well, reaction was quite unanimous and share price declined by 5.2%. Truth to tell it is quite a lot for stable business. Imagine, 5% decline for company traded at around P/E = 20 is equivalent to one-year results. That’s a lot, isn’t it?

Let’s look on more details. First let’s have a look on top-line:

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Revenues are lower y/y. This is mainly due to deconsolidation of Venezuelan operations, but does it really matter? Well if you are negative on company you will always find a point to complain about. Revenues are just lower and Venezuelan business will not be consolidated again. Looking at other markets we can see that company is not growing, which is a main problem.

Let’s look lower on operating profit:

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Operating profit is increasing, though when adjusting for one-off it is more or less flat.

Though why was share price falling?

 

Well, I simply think that CL was (and still is) too expensive versus peers (PG, CLX, KMB), which offer a better growth opportunities in comparison to current multiples. That’s all, there is nothing more wrong with CL in my opinion. Colgate-Palmolive is traded around 23 times P/E and 14 times EV/EBITDA. Isn’t it a lot for not fast growing “bond-like” company?

 

In my opinion it is and that Is why for me it is still not an interesting buying opportunity, although shares are 10% below the all-time high price.

 

Disclaimer – CL no position