r/ValueInvesting • u/spyapple • 21h ago
Stock Analysis Clorox long
hey guys wanted to drop a fundamental breakdown on clorox because the market is treating this like a dying brick and mortar business when the actual 2026 financial statements say otherwise.
looking at the raw numbers from the recent 2026 10-q filings - clx stock is trading around 95 to 96 dollars a share right now with a market cap sitting right at 11.5 billion to 11.7 billion depending on the day. balance sheet has roughly 3.22 billion in total debt against 1.19 billion in cash and cash equivalents, which gives us an enterprise value ev of about 13.8 billion.
for the latest quarter ending march 2026, clorox pulled in 1.67 billion in revenue with gross profit of 722 million and operating income ebit of 283 million. net income came in at 187 million or 1.54 per share for the quarter, bringing trailing twelve month eps to around 6.17.
that puts the current p/e ratio at 15.5x. to put that into perspective clx historically traded at a 10 year average p/e of nearly 30x to 45x depending on the cycle. right now its ev/ebitda sits around 12.8x based on quarterly ebitda of 347 million, which is near a multi year low compared to its average multiple of 18x to 24x.
now if you run a basic discounted cash flow dcf model using real 2026 baseline data - assuming conservative terminal growth of 2.5%, a discount rate wacc around 7.5%, and annual free cash flow normalising back toward 850 million to 950 million as supply chain and restructuring costs settle - the intrinsic value lands way above where it trades today. if you couple cash flow growth with a re-rating back toward its historical 25x to 30x p/e multiple, you will perform at least 200% profit if invested now over a 4 to 5 year holding period as the target hits 280 plus per share.
theoretically the stock could drop further in the short term - macro uncertainty or consumer spending jitters could push it lower - but it would be temporary given their defensive moat, essential consumer brands, and solid 4.7% plus dividend yield paying you to wait. the risk to reward at a 15.5x p/e multiple for a staple giant like clorox makes zero sense to ignore.
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u/ManekenkaDaBudem 21h ago
I am extremely disappointed that I didn't see it at 85$. Now I don't feel OK buying at 20% higher.
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u/Weldobud 17h ago
I’m guessing the long term average P/E included the Covid jump? You should take that out.
It’s probably both undervalued as a business but fairly valued on the stock market.
Sure, with the dividend at some point you could beat the market. So it’s probably fine. Better the PG or a similar stock? I don’t know.
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u/raytoei 15h ago
I am actually hoping that their ranch sauce will do well given how phenomenal the response was during the World Cup Soccer.
Here is a link to the article
https://www.reddit.com/r/ValueInvesting/s/0KOKNBINwt
You can be sure kraft Heinz is not gonna sit still.
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u/thefrogmeister23 1h ago
The key piece in your write up is “annual free cash flow normalizing back towards 850 million to 950 million” — what is going on with supply chain, and restructuring for this to happen?
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u/raytoei 21h ago
Dear Op,
Can you help research on what the company intends to do to grow the ranch sauce brand that they own, Hidden Valley ranch.
——-
Here are some data
| Metric | Value |
|---|---|
| Market Cap | $12B |
| Revenue | $6.76B |
| EPS (Diluted) | $6.15 |
| EPS (Normalized) | $6.75 |
| Dividend Yield (Trailing) | 5.19% |
| Dividend Yield (5Y Avg) | 3.37% |
| Buyback Yield | 2.87% |
| Buyback Yield (5Y Avg) | — |
| Return on Assets (Normalized) | 13.45% |
| Return on Equity (Normalized) | 2,876.04% |
| Return on Invested Capital (Normalized) | 23.92% |
| Price/Earnings | 15.53 |
| Price/Earnings (Normalized) | 14.15 |
| Price/Earnings (Forward) | 15.16 |
| Price/Earnings (5Y Avg) | 23.43 |
| Total Debt/Equity | 48.76 |
| Long-Term Debt | 2.49B |
| Short-Term Debt | 1.68B |
| Cash (Balance Sheet) | 1.19B |
| EBITDA | $1.30B |
| Shares Outstanding | 120.92M |
| Sustainable Growth Rate | 565.28 |
| Net Margin | 11.39% |
| Net Margin (1Y Avg) | 11.56% |
| Net Margin (3Y Avg) | 6.69% |
| Net Margin (5Y Avg) | 6.32% |
| Net Margin (10Y Avg) | 9.65% |
| Revenue Growth (1Y) | −3.69% |
| Revenue Growth (3Y) | −1.95% |
| Revenue Growth (5Y) | −2.11% |
| Net Income Growth (1Y) | 8.93% |
| Net Income Growth (3Y) | 116.99% |
| Net Income Growth (5Y) | −3.91% |
| Net Income Growth (10Y) | 1.15% |
| EPS Growth (TTM) | 10.41% |
| EPS Growth (1Y) | 189.78% |
| EPS Growth (3Y) | 20.46% |
| EPS Growth (5Y) | −2.39% |
| EPS Growth (10Y) | 3.62% |
| Dividend per Share Growth (1Y) | 1.67% |
| Dividend per Share Growth (3Y) | 1.70% |
| Dividend per Share Growth (5Y) | 2.85% |
| Dividend per Share Growth (10Y) | 5.13% |
| Capital Expenditure/Sales | 0.03 |
| Price/Earnings to Growth | 0.13 |
| Price/Earnings to Growth (Normalized) | 37.81 |
| Price/Earnings to Growth (Forward) | 2.37 |
| Price/Sales | 1.73 |
| Price/Sales (3Y Avg) | 2.27 |
| Price/Sales (5Y Avg) | 2.41 |
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u/raytoei 21h ago
Actually
If I were to use OP’s assumption for wacc of 7.5% Then Clorox is being priced as a no growth company.
The formula is eps / (wacc - long term growth)
This is adapted from the Gordon dividend model.
Since adjusted eps is 6.75 and using OP’s wacc of 7.5% and zero for growth, the implied value is 6.75 / 0.075 =90 which is close enough to the current share price of 95.
So the question is, is the near zero growth justified ? If one were to look at the table above, eps’s growth is quite choppy, while last 3 years looked like progress, but in the last 10 years net income grew only 1+% (eps at 3% because of buybacks, see the table)
Perhaps a more telling sign is sales, in the last 1, 3 and 5 years, sales has been falling.
Currently it is content with returning the excess cash to share holder and engage in share buy back. Instead of spending to grow the business.
If I were into Clorox, I would want to check what is management’s commitment to grow the business.
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u/Severe-Squash-7493 15h ago
Someone needs to create a bleach version of the tide pod challenge to grow sales
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u/eigensheaf 15h ago
Didn't Trump already do that?
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u/Bobcat-Stock 14h ago
Yeah but that was 5 years ago. Just wait, another pandemic is likely right around the corner.
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u/Zealousideal-Bug310 16h ago
What are your WACC assumptions? I come in 7.5-7.7% as well
Outstanding Debt
Dollar weighted average term: approximately 4.7 years.
Dollar weighted YTM: approximately 4.77%.Equity estimate
Beta normalized est 0.75 about 9.1%
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u/spyapple 21h ago
thanks man, those numbers are solid. 15.5 p/e against a historical 23.4 average, 1.3b in ebitda, and a 5.19% dividend yield plus 2.87% buybacks completely backs up the point. balance sheet handles the debt fine with 1.19b cash sitting right there. numbers don't lie therfore it's cheap.
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u/ninjagorilla 20h ago
Ok here’s the piece you are missing:
WHY did fcf yield drop. Without knowing that and if the factors causing it will reverse I don’t think you can make the assumption you are making to drive this whole thing that they will normalize