With the ongoing Covid-19 pandemic, people have been stepping up their hygiene standards at home so as to protect themselves as well as their loved ones from being part of the Covid-19 statistic.

Among the products on the supermarket shelves that clean and disinfect our homes is Clorox, produced by the NYSE-listed The Clorox Company (NYSE:CLX).

Apart from Clorox, some of the brands you should be familiar with (which is also from the company) include Glad’s range of plastic food wraps and food bags (you can check out their range of products on the webstore of supermarket retailers Cold Storage and Giant), Liquid-Plumr’s range of decloggers (again, you can check out the range of products sold in Singapore on the website of Cold Storage and Giant), as well as Burt’s Bees range of skin care products (you can check out their range of products on Sephora Singapore’s website here.)

In my writeup about The Clorox Company today, I will be sharing with you a bit more about the company’s other businesses, followed by looking at its historical financial performance, debt profile, and dividend payout to its shareholders over the past 6 financial years (as the company has a financial year-end every 30 June, I will be looking at its financial results between FY2014/15 and FY2019/20.) On top of that, I will also be sharing whether or not at its current traded price, is the company considered ‘cheap’ or ‘expensive’ based on its current vs. its historical valuations.

Let’s get started…

More about The Clorox Company’s Businesses

The Clorox Company was established since 1913, with its namesake brand of bleach being the company’s only product then.

Fast forward to the year 2020, its portfolio now consists of diverse products sold in more than 100 countries worldwide, including (you can find more information about the products via the respective links):

Historical Financial Performance of The Clorox Company between FY2014/15 and FY2019/20

Total Revenue and Net Profit (US$’mil):

Financial
Year
FY2014/15FY2015/16FY2016/17FY2017/18
Total Revenue
(US$’mil)
$5,655m$5,761m$5,973m$6,124m
Net Profit
(US$’mil)
$580m$648m$701m$823m
Financial
Year
FY2018/19FY2019/20
Total Revenue
(US$’mil)
$6,214m$6,721m
Net Profit
(US$’mil)
$820m$939m

The Clorox Company's Total Revenue and Net Profit between FY2014/15 and FY2019/20

The company have managed to record a steady growth in its total revenue over the years – where it went up from US$5,655m in FY2014/15 to US$6,721m in FY2019/20, a compound annual growth rate (CAGR) of 2.9%.

As for its net profit, apart from a marginal 0.4% year-on-year (y-o-y) dip in FY2018/19, the other 5 years saw improvements – over a 6-year period, its net profit saw a CAGR of 8.4%.

Gross and Net Profit Margin (%):

The following table is the company’s gross and net profit margin recorded over the past 6 years which I have computed:

Financial
Year
FY2014/15FY2015/16FY2016/17FY2017/18
Gross Profit
Margin (%)
43.6%45.1%44.7%43.7%
43.9%Net Profit
Margin (%)
10.3%11.2%11.7%13.4%
Financial
Year
FY2018/19FY2019/20
Gross Profit
Margin (%)
43.9%45.6%
Net Profit
Margin (%)
13.2%14.0%

The Clorox Company's Gross and Net Profit Margin between FY2014/15 and FY2019/20

Another thing I like about The Clorox Company is that, over the past 6 financial years, its gross profit margin have more or less remained consistent at around the 43% to 45% level, and that its net profit margin have saw a steady increase over the same time period (apart from FY2018/19, where it dipped by 0.2 percentage points compared to the year before.)

Return on Equity (%):

Another thing I look at is the company’s Return on Equity, or RoE for short. To explain in layman terms, it is a measure of the amount of profits the company is able to generate (in percentage terms) for every dollar of shareholders’ money it uses. For instance, if the company has a RoE of 15.0%, it means the company is able to generate a profit of $15 for every $100 of shareholders’ money it uses in its businesses.

The following table is The Clorox Company’s RoE over the years which I’ve computed:

Financial
Year
FY2014/15FY2015/16FY2016/17FY2017/18
Return on
Equity (%)
491.5%218.2%129.3%113.4%
Financial
Year
FY2018/19FY2019/20
Return on
Equity (%)
146.7%103.4%

The Clorox Company's Return on Equity between FY2014/15 and FY2019/20

While its RoE have trended downwards over the years, but in my personal opinion, the fact that its RoE have been maintained at above 100.0% over the years is quite a feat.

The Clorox Company’s Debt Profile between FY2014/15 and FY2019/20

When it comes to looking at a company’s debt profile, generally I would like to see it having little or no debt, being in a net cash position, as well as one that is able to maintain its current ratio (which is its ability to pay off its short-term debts) at above 1.0.

Let us take a look at The Clorox Company’s debt profile over the past 6 years below:

Financial
Year
FY2014/15FY2015/16FY2016/17FY2017/18
Cash & Cash
Equivalents
at the End
of Period
(US$’mil)
$382m$401m$419m$134m
Total
Borrowings
(US$’mil)
$1,796m$1,789m$1,391m$2,284m
Net Cash/Debt
(US$’mil)
-$1,414m-$1,388m-$972m-$2,150m
Current
Ratio
1.01.00.81.1
Financial
Year
FY2018/19FY2019/20
Cash & Cash
Equivalents
at the End
of Period
(US$’mil)
$133m$879m
Total
Borrowings
(US$’mil)
$2,287m$2,780m
Net Cash/Debt
(US$’mil)
-$2,154m-$1,901m
Current
Ratio
0.91.4

If I have to name one thing I do not quite like about the company, it will be its debt profile – where its total borrowings have been on the rise over the years, coupled with the fact that it is in a net debt position in all of the 6 financial years I have looked at, and also its current ratio have fell under 1.0 in 2 out of 6 years.

Dividend Payout by The Clorox Company between FY2014/15 and FY2018/19

The management of The Clorox Company declares a dividend to its shareholders on a quarterly basis – but there’s one thing you need to take note of if you are a Singaporean investing in the company, and that is, the dividends that you receive are subjected to a 30.0% withholding tax, meaning you will receive 30.0% less than what is declared.

The following table is The Clorox Company’s dividend payout to its shareholders over the years, along with its payout ratio:

Financial
Year
FY2014/15FY2015/16FY2016/17FY2017/18
Dividend Per
Share
(US$/share)
$2.99$3.11$3.24$3.60
Dividend
Payout Ratio
(%)
68.4%63.2%60.8%57.5%
Financial
Year
FY2018/19FY2019/20
Dividend Per
Share
(US$/share)
$3.94$4.29
Dividend
Payout Ratio
(%)
62.3%58.3%

The Clorox Company's Dividend Per Share between FY2014/15 and FY2019/20

Dividend payouts by the company have gone up every single year over the past 6 years I have looked at – from $2.99/share in FY2014/15 to $4.29/share in FY2019/20, a CAGR of 6.2%.

In terms of its dividend payout ratio, it seems that the company have been maintaining its payout ratio at below 65.0%.

Is the Current Traded Price of The Clorox Company Considered ‘Cheap’ or ‘Expensive’?

Personally, to find out whether or not a company’s current traded price is considered ‘cheap’ or ‘expensive’, I will compare its current valuations against its average over the years.

In this section, let us take a look at whether or not the current traded price of The Clorox Company is considered ‘cheap’ or ‘expensive.’

At the time of writing, the share price of The Clorox Company is trading at US$214.79, and as such, its current valuations are as follows:

P/E ratio: 28.8
P/B ratio: 29.8
Dividend Yield: 2.0% (computed based on a total dividend payout of US$4.29/share in FY2019/20)

The following table is The Clorox Company’s valuations over the past 6 years I have computed, along with its average:

Financial
Year
FY2014/15FY2015/16FY2016/17FY2017/18
P/E Ratio23.828.125.021.6
P/B Ratio113.460.331.723.8
Dividend Yield2.9%2.2%2.4%2.7%
Financial
Year
FY2018/19FY2019/20Average
P/E Ratio24.229.825.4
P/B Ratio34.430.549.0
Dividend Yield2.6%2.0%2.5%

Comparing its current vs. its 6-year average valuations, it seems that at its current share price, The Clorox Company is considered to be ‘expensive’ due to its higher-than-average current P/E ratio, along with a lower-than-average current dividend yield.

In Conclusion

Some of the things I like about the company include its growing revenue and net profit over the years, as well as its improving dividend payout to its shareholders.

However, I am not too comfortable with the fact that the company’s total borrowings have gone up over the same time period, along with it being in a net debt position in all of the 6 financial years I have looked at.

With that, I have come to the end of my writeup about the company today. Do take note that this post is by no means a buy or sell recommendation for the shares of the company, and that everything you have just read is meant for educational purposes only. Please do your own due diligence before you make any investment decisions.

Disclaimer: At the time of writing, I am not a shareholder of The Clorox Company.

 

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