Should You Buy Colgate-Palmolive Stock At $80?

CL: Colgate Palmolive logo
Colgate Palmolive

Colgate-Palmolive stock (NYSE: CL) is up 7% in a month, outperforming the broader markets, with the S&P500 up 1%. After its recent rise, we believe that the stock has limited room for growth. CL stock growth has been bolstered by the upbeat Q1 results it reported last week. Colgate-Palmolive revenues were up 8.5% to $4.8 billion in Q1’23, compared to a $4.6 billion consensus estimate. Sales were up 10% on an organic basis, led by robust 12% pricing gains, which offset a 2% decline in volume. This trend is expected to continue in the near term. However, the company’s gross margins declined 160 bps in Q1, partly due to a one-off impact from private label sales. Its operating margin declined 130 bps to 19.7%. Our Colgate-Palmolive Operating Income Comparison dashboard has more details. The earnings of $0.73 on a per share and adjusted basis were down 1% from $0.74 in the prior-year quarter. This compares with the $0.70 consensus estimate.

Not only did the company post an upbeat Q1, but it also raised its full-year outlook. It now expects its organic sales growth to be between 4% and 6% vs. its prior guidance of 3% and 5%. It also expects gross margin to expand for the full-year and adjusted earnings to rise in the mid-single digits. An upbeat result combined with an upward revision in outlook boded well with the investors.

We have updated our model for CL to reflect the latest quarterly results. We estimate Colgate-Palmolive’s Valuation to be $85 per share, about 5% above its current market price of $81. At its current levels, CL stock is trading at 25x the forward earnings estimate of $3.20, compared to its last three-year average of 26x, implying limited room for growth in CL stock.

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While CL stock may have limited room for growth, it is helpful to see how Colgate-Palmolive’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Citrix Systems vs. Procter & Gamble.

Despite higher inflation and the Fed raising interest rates, CL stock has risen 2% this year. Can it drop from here? See how low Colgate-Palmolive stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns May 2023
MTD [1]
YTD [1]
Total [2]
 CL Return 1% 2% 23%
 S&P 500 Return 0% 9% 86%
 Trefis Multi-Strategy Portfolio 0% 9% 242%

[1] Month-to-date and year-to-date as of 5/2/2023
[2] Cumulative total returns since the end of 2016

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