The Clorox Company (NYSE: CLX) sailed to higher and higher stock prices during the heights of the pandemic and shortly after, as consumers whisked cleaning products off the shelves in droves. The company reported its strongest quarterly sales growth in more than two decades as of November 2020 and raised its full-year revenue forecast as hygiene demands required more than just cleaning products, but also demanded water filtration devices and charcoal for more outdoor grilling during the pandemic.
The stock soared to an all-time high of $240 per share during the COVID-19 pandemic, but the gains have not continued to stay on their feet and cheering. Clorox's stock has been dwindling since the summer of 2020 and has performed at a bedraggled 35% below huge highs.
Net sales of $1.8 billion were flat compared to last year's quarter and gross margin of 37.1% was flat versus the year-ago quarter, due to increased commodity, manufacturing and logistics costs though the company has done its best to offset these challenges with pricing and cost savings initiatives. Organic sales were up 1% and the three-year average growth rate for net sales was 3%.
About the Clorox Company
It's not all bleach, folks. Despite the fact that household bleach has the same name as the company, The Clorox Company markets a wide number of consumer products internationally and domestically.
Clorox was founded on May 3, 1913 as the Electro-Alkaline Company by five Oakland, California-area businessmen, and just one had chemistry training, converting brine from ocean water into sodium hypochlorite bleach. The company's first product, Clorox liquid bleach, was packaged in large returnable containers and distributed by horse-drawn wagon to local breweries, dairies, and laundries for cleaning and disinfecting purposes.
In 1916, a household-based liquid bleach product of 5% sodium hypochlorite instead of a 21% formula endured as a laundry aid, stain remover and disinfectant.
Today, the Clorox Company creates consumer and professional products for the U.S. market, including the following:
- Cleaning products: Laundry additives and home care products under the Clorox, Clorox2, Scentiva, Pine-Sol, Liquid-Plumr, Tilex, and Formula 409 brands as well as the CloroxPro and Clorox Healthcare brands.
- Professional food service products: Professional food service products include those under the Hidden Valley brand, including dressings, dips, seasonings, and sauces.
- Vitamins, minerals and supplement products: Vitamins, minerals and supplemental products include RenewLife, Natural Vitality, NeoCell, and Rainbow Light brands.
- Household products: Household products include cat litter products under the Fresh Step and Scoop Away brands, bags and wraps under the Glad brand and grilling products under the Kingsford charcoal brand.
- Personal care products: Personal care products include those under the Burt's Bees brand.
- Water filtration products: Water filtration products include those under the Brita brand.
The company also produces the following in the international market:
- Laundry additives
- Home care products
- Water filtration systems
- Digestive health products
- Grilling products
- Cat litter
- Food products
- Bags and wraps
- Natural personal care products
Professional cleaning and disinfecting products, including those under the Clorox, Ayudin, Clorinda, Poett, Pine-Sol, Glad, Brita, RenewLife, Ever Clean and Burt's Bees brands. The Clorox Company sells its products through mass retailers, grocery outlets, warehouse clubs, dollar stores, home hardware centers, drugstores, pet stores, third-party channels and distributors and more. The company was founded in 1913 and is headquartered in Oakland, California.
Diluted net earnings per share (diluted EPS) increased 4% to 81 cents from 78 cents in the year-ago quarter. Adjusted EPS decreased 2% to 93 cents versus 95 cents in the year-ago quarter.
Pros and Cons of Investing in the Clorox Company
Let's take a close look at the pros and cons of investing in the Clorox Company.
First, let's take a look at the pros of investing in the Clorox Company.
- Dividends: The company's generous dividends are one of the bright, shiny reasons to invest in the Clorox Company. The company's dividend yield is 3.37% with a dividend increase track record beyond 50 years and has a current annual dividend of $4.72. The annual payout grew 428% over the last two decades and is both a Dividend King and a Dividend Aristocrat.
- Returns: The Clorox company has seemingly waited quite a long time to wake up and smell the coffee, and the pandemic provided the perfect opportunity. Revenues have increased by 19% over the last five years and free cash flows twirled upward like a tornado in 2020 but then touched back down to earth not long after the heights of the pandemic.
What are the downsides of investing in the stock? Let's take a quick look and the cons.
- May not have sufficient earnings: Clorox pays out 126.9% of its earnings in the form of dividends, which means that it may not have sufficient earnings to cover its dividend payment in the future. In comparison, Church & Dwight pays an annual dividend of $1.05 per share and has a dividend yield of 1.4%, showing a much more healthy dividend yield.
- Overvalued: The stock may be overvalued, meaning that it has a current price that is not justified by its earnings outlook, which the P/E ratio usually shows. The company may also be a poor pick for value investors and it may underperform the market in the future.
- Pandemic was its heyday: Are its best days behind the company? Today, Clorox's free cash flows have fallen 11% in five years and the stock has taken a considerable tumble since the height of the pandemic and just after.
Should You Tread Carefully with Clorox Corporation?
This Dividend King has seen some topsy-turvy changes over the past couple of years and has been "sort of" expensive. The company has also faced increased costs due to supply chain issues, like many other companies that have consumer deliverables.
Before you make a final decision about whether to invest in Clorox, note that Clorox has a long history of challenging its peers. Dividends and stock price gains have grown over recent historical periods.
Learn more: 11 Dividend Stocks with High Yields
Companies Mentioned in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|Church & Dwight (CHD)||$85.98||+2.0%||1.27%||51.18||Hold||$87.88|