Could You Be Missing Clorox Stock’s Upside?

We think Clorox (CLX) stock could be a good value buy. It is currently trading lower than average valuation, and has strong margins to go with its modest valuation.

Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve

What Is Happening With CLX

CLX may be down -31% so far this year but is now 34% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.

The stock may not reflect it yet, but here is what’s going well for the company. Clorox has achieved ten consecutive quarters of gross profitability expansion through cost-saving initiatives and a dual pricing approach, supported by divesting lower-profit lines. While revenue growth faces near-term pressure from a weaker consumer environment, competitive promotions in categories like cat litter, and a temporary ERP system impact on product shipments expected to reverse in H1 FY2026, Clorox is introducing new offerings such as Screen+ Sanitizing Wipes and various Hidden Valley Ranch flavors to stimulate demand. The current valuation largely reflects these immediate growth hurdles and broader market caution, despite management’s ongoing focus on operational efficiency.

CLX Has Strong Margin Play

• Revenue Growth: -9.3% LTM and -1.1% last 3 year average. Not ideal, but this is a margin and value play.
• Strong Margin: Nearly 12.6% 3-year average operating margin.
• No Major Margin Shock: Clorox has avoided any large margin collapse in the last 12 months.
• Modest Valuation: Despite encouraging fundamentals, CLX stock trades at a PE multiple of 16.7

Below is a quick comparison of CLX fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While CLX stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Clorox took a pretty steep hit during the Dot-Com Bubble, falling about 54%. It dropped nearly 44% during the Inflation Shock and around 29% in the Global Financial Crisis. Even the less severe events like the 2018 Correction and Covid Pandemic dragged it down 23% and 18%, respectively. It’s a solid company, but these dips show that no stock is immune when the broader market tanks.

For more details and our view, see Buy or Sell CLX Stock.

Stocks Like CLX

Not ready to act on CLX? Consider these alternatives:

1. Accenture (ACN)
2. Adobe (ADBE)
3. PayPal (PYPL)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Meaningfully below 1Y high
3. Current P/S < last few year average
4. Strong operating margin
5. P/E ratio below S&P 500 median

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
• Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
• Strategy consistent across market cycles

Portfolios Are The Smarter Way To Invest

Stocks can jump or crash but long term success comes from staying invested. The right portfolio helps you ride gains and cushion single stock drops

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.