Is Clorox Still A Buy After Sales Rise 27%?

Back in late June and early July I showed you 3 Stocks To Depression Proof Your Portfolio… With one of them being the cleaning and disinfecting company Clorox.

And while thankfully it now looks like we’re not heading toward a Depression…

Today I want to answer the question – Is Clorox Still A Buy After Sales Rise 27%? You can read past article in full using the link above.

But if you don’t want to; here’s a quick recap of why I told you to buy Clorox back in early July…

Depression Proof Stock #3 – Clorox (CLX)

Clorox is another depression resistant stock you should consider buying today.

Not just because of its long and storied history of helping clean our homes.

But also, because during this pandemic we’re cleaning and disinfecting things more than ever.

This benefits Clorox more than just about any other company on Earth since it’s one of the world’s leading home cleaning product companies.

Some of Clorox’s most recognizable brands are as follows.

  • Clorox Bleach
  • Clorox Disinfecting Wipes
  • Pine Sol

And it also owns brands we use every day outside of cleaning too like Kingsford Charcoal.  Brita water filters.  And Fresh Steps cat litter.

None of these things will be harmed during any extended economic issues.

And like the 2 others stocked mentioned previously in this series, it’s also a solid company.

Its operating profit margin averaged 17.9% every year over the last 10 years. Like mentioned above, I look for any company to produce above 10% margins on a consistent basis to consider as an investment.

And its FCF/Sales margin averaged 10.9% per year… I look for anything above 5% on a consistent basis to consider an investment.

The company meets my threshold on both important metrics… These are important because they show Clorox produces profits and cash to continue funding operations and growth.

Plus, it also pays you a 2% dividend just to own their shares.

And on top of this its selling at a reasonable price to cash flow (P/CF) ratio of 20 as of this writing.

I want to own companies that are profitable and at least fairly valued.  I look to research stocks further that have a P/CF of 25 or lower… If I can buy at cheap prices even better.

Clorox is another stock that will be around for decades to come – no matter what the economic situation becomes.

Because of this, you should look at them if you’re looking for Depression resistant stocks.

Conclusion

As I said above, I think we’re heading not for an average recession… Or even a bad recession like we saw from 2007 to 2009.

I think we’re heading for a Depression type of economy in the coming months.  And the best thing to do is prepare yourself and your investments.

The list above should give you great ideas on stocks that will not only survive whatever downturn is still to come.  But also thrive in the coming years and decades no matter what our economic situation looks like.

***

This thesis to buy Clorox stock continued to play out after it released its most up to date quarterly earnings on November 2nd, 2020.

Sales rose 27% in the year to year quarterly period to $1.9 billion.

Earnings per share rose 103% in the year to year quarterly period to $3.22 per share.

And these both – combined with the pandemic still ongoing as of this writing – led Clorox to increase its full year sales and earnings per share guidance… It now sees both rising between 5% and 9%.

These results are fantastic.  And is a big part of why I recommended you buy Clorox stock back in early July.

But surprisingly, since July 1st, 2020 Clorox shares fell from $219.57 per share to $201.56 per share as of this writing.

Or a fall of 8.2%.

Why?

Frankly, I’m not 100% sure.

But my guess is because during much of this time Covid cases worldwide flatlined.  And then only toward October and now in November have we seen cases increase.

Also, a factor in its share price fall is the so far promising data coming from the Covid vaccine trials.

Of course, these are good things for all of us and the economy.

But its not great for Clorox stock.

The fall in share price isn’t concerning by itself when it comes to considering buying Clorox though…

But its current valuation is.

Its P/E is 22.6.

Its P/CF is 15.7.

And its forward P/E is 27.5.

When I recommend an investment, I think about the long term… Not the short term. And unfortunately, even though this pandemic looks to go on for a while longer still – with Clorox benefiting – its too overvalued to buy now.

Even after its stellar earnings and its share price fall since July.

For these reasons – and the ones in the previous article – I recommend you avoid buying new Clorox stock… Until its cheaper.

Click here to see some of the stocks we recommend to Depression Proof Your Portfolio.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

2 Shares:
You May Also Like

Bear Market – May 24

How’s your Sunday? In today’s Bear Market newsletter, you will find plenty of financial news and economic info…as…