Given its better prospects, we believe that Colgate-Palmolive stock (NYSE: CL) is a better pick than Marriott stock (NASDAQ: MAR). Although these companies are from different sectors, we compare them because they have a similar market capitalization of around $58 billion and similar operating income of about $3.5 billion to $4.0 billion. The decision to invest often comes down to finding the best stocks within the parameters of certain characteristics that suit an investment style. The size of profits can matter, as larger profits can imply greater market power. Since these stocks are from different sectors, comparing P/S against one another may not be helpful. We compare their current multiples with the historical ones in the sections below to better gauge their valuations.
Interestingly, CL stock has had a Sharpe Ratio of 0.0 since early 2017, lower than 0.5 for MAR and 0.5 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
If we look at stock returns, Marriott, with 32% returns this year, has fared better than Colgate-Palmolive, down 10%. In comparison, the broader S&P 500 index is up 12%. There is more to the comparison, and in the sections below, we discuss why we believe that CL stock will offer better returns over MAR in the next three years. We compare a slew of factors, such as historical revenue growth, returns, and valuation, in an interactive dashboard analysis of Colgate-Palmolive vs. Marriott: Which Stock Is A Better Bet? Parts of the analysis are summarized below.
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1. Marriott’s Revenue Growth Is Better
- Marriott’s revenue growth has been better, with a 10.5% average annual growth rate in the last three years, compared to 4.6% for Colgate-Palmolive.
- Colgate-Palmolive is a leading manufacturer and distributor of household, health care, personal care, and veterinary products in global markets. It derives around 45% of its revenue from oral care products.
- Its sales have risen over the recent quarters based on pricing growth, partly offset by volume decline and forex headwinds. This trend is expected to continue in the near term.
- Despite concerns about the global economy, Marriott has benefited from a robust travel and leisure demand.
- The company has seen strong occupancy and average room rate growth in recent quarters. Its revenue per available room metric (RevPAR) of $124 now is better than $117 seen in 2019, before the pandemic.
- The company’s operations in Asia were the most significant growth drivers, led by China, which eased its Covid-19-related travel restrictions late last year.
- Our Colgate-Palmolive Revenue Comparison and Marriott Revenue Comparison dashboards provide more insight into the companies’ sales.
- Looking forward, we expect the revenue growth rate to slow in the near term after a substantial uptick in sales in recent quarters.
2. Marriott Is More Profitable
- Colgate-Palmolive’s reported operating margin slid from 21.0% in 2019 to 14.8% in 2022, while Marriott’s operating margin increased from 8.6% to 16.8% over the same period.
- Looking at the last twelve months period, Marriott’s operating margin of 17.6% fares better than 13.2% for Colgate-Palmolive.
- Our Colgate-Palmolive Operating Income Comparison and Marriott Operating Income Comparison dashboards have more details.
- Looking at financial risk, Colgate-Palmolive fares better, with its 15% debt as a percentage of equity lower than 19% for Marriott, and its 5% cash as a percentage of assets is also higher than 2% for the latter, implying that CL has a better debt position and more cash cushion.
3. The Net of It All
- We see that Marriott has demonstrated better revenue growth and profitability. On the other hand, Colgate-Palmolive has a better financial position.
- Now, looking at prospects, using P/S as a base, due to high fluctuations in P/E and P/EBIT, we believe CL stock will offer better returns in the next three years given that it is trading lower than its historical average, while the positives for Marriott appear to be priced in.
- If we compare the current valuation multiples to the historical averages, Colgate-Palmolive fares better. Marriott’s stock trades at 2.6x trailing revenues aligning with its last five-year average of 2.7x, and Colgate-Palmolive stock trades at 3.1x trailing revenues vs. the last five-year average of 3.9x.
- Our Colgate-Palmolive (CL) Valuation Ratios Comparison and Marriott (MAR) Valuation Ratios Comparison have more details.
- The table below summarizes our revenue and return expectations for both companies over the next three years and points to an expected return of 11% for Colgate-Palmolive over this period vs. a -2% expected return for Marriott stock, based on Trefis Machine Learning analysis – Colgate-Palmolive vs. Marriott – which also provides more details on how we arrive at these numbers.
- Although we believe Colgate-Palmolive is a better pick over Marriott, we acknowledge that 11% returns for CL isn’t great. There are better opportunities over CL stock. Our Better Bets Than CL Stock dashboard details S&P500 stocks that can offer better returns in the next three years.
While CL may outperform MAR stock in the next three years, 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.
|S&P 500 Return||0%||12%||92%|
|Trefis Reinforced Value Portfolio||0%||23%||533%|
 Month-to-date and year-to-date as of 10/2/2023
 Cumulative total returns since the end of 2016