Consumer Products

Value In Consumer Products Stocks: A Safety Premium (CHD, CLX, CL, KMB, PG)

In tough times, value investors look for stocks that they feel are valued in a manner which already discount much of the trouble and pitfalls ahead.  Defensive stocks are often the winners during hard times as well.  So what about when value investors decide to apply their valuation analysis to the defensive sector of consumer products?  After all, are you likely to stop using shampoo, deodorant, toothpaste, toilet paper, and on and on?

24/7 Wall St. has evaluated the following consumer products companies: Church & Dwight Company, Inc. (NYSE: CHD); Clorox Corporation (NYSE: CLX); Colgate-Palmolive Company (NYSE: CL); Kimberly-Clark Corporation (NYSE: KMB); and Procter & Gamble Company (NYSE: PG).

What is amazing here is that these valuations in many cases are not representative of traditional “value” when it comes to price to earnings ratios, book value, or even in return on equity.  Still, there are some solid dividends and if you want a sector that is likely to withstand a hard economy better than other risky sectors it is this consumer products sector.

Church & Dwight Company, Inc. (NYSE: CHD) recently traded at $42.64 and its market cap is $6 billion.  The stock’s 52-week trading range is $30.54 to $44.09. The current value is trading at a price-to-book ratio of about 3 to 1.  Its forward price earnings multiple is 15.2 and its return on equity is 14.95%.  The consumer products company currently pays a dividend yield of 1.6% to investors.  Thomson Reuters has a consensus price target of $43.11, implying an upside of about 2% to the most recent price. If there is one company which performed throughout the malaise it is C&D.  It has brands like Trojan, Arm & Hammer, Nair, Oxi Clean, XTRA and more.

Clorox Corporation (NYSE: CLX) recently traded at $68.91 and its market cap is $9 billion.  The stock’s 52-week trading range is $59.08 to $74.83.  Its forward price earnings multiple is 15.6.  The consumer products company currently pays a dividend yield of 3.5% to investors.  Thomson Reuters has a consensus price target of $69.92, implying roughly 1.5% upside to the most recent price.  Clorox is currently difficult to evaluate because of the Carl Icahn offer and intrusion to move the company to seek a higher buyer.  As such, we are leaving this one as is, but some of its brands are Clorox, Burt’s Bees, Glad, Kingsford charcoal, Hidden Valley, Pine-Sol and more.

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