Colgate-Palmolive Stock Profile
Colgate-Palmolive is a company all of us are familiar with and probably many of us use their products on a regular, if not a daily, basis (hello toothpaste!). Colgate-Palmolive started as a starch, soap and candle business in New York City in 1806. In 1928, it merged with the Palmolive company to form Colgate-Palmolive-Peet (becoming Colgate-Palmolive officially in 1953) and was first listed on the NYSE in 1930. This is a company steeped in history in North America; launching many different products and hitting milestones. Today, it focuses on Oral Care, Personal Care, Home Care and Pet Nutrition. It has won numerous awards (all listed on its website) from Best Company for Work/Life Balance to Green Ranking to list of Most Ethical Companies. The awards are too many to mention here, it is really quite amazing the scope of awards and recognition this company has experienced and continues to experience. Most recently, in 2017, Forbes named it one of America’s Most Reputable Companies and one of the World’s Most Admired Companies. I am definitely impressed by the range of what they have accomplished.
All the company policies are listed on the corporate website. Given investors are becoming more and more interested in the company behind their investment, the fact all of these policies are available for review is refreshing. The polices range from anti-bribery to HIV to no deforestation. There is even a policy regarding Palm Oil! The company is committed to responsible sourcing Palm Oil for its products.
Here is a sampling of the brands by Colgate-Palmolive:
From an investor perspective, here are some highlights from its most recently available Annual Report:
· 37,000 employees worldwide;
· Products sold in over 200 countries;
· 50% of its net sales in 2017 were in emerging markets with the other half in developed markets;
· It is committed to focusing on its four core areas of oral care, personal care, pet nutrition and home care (cleaning products);
· #1 market share for toothpaste, #1 for manual toothbrushes worldwide and #2 for mouthwash, #1 market share for pet nutrition products by vet clinics in the US, #1 for liquid hand soap worldwide, #2 worldwide for liquid fabric and hand dishwashing products;
· Dividend payments have increased for 55 consecutive years;
· Clear plan for continued growth while keeping expenses down. The Annual Report has some interesting images of Colgate-Palmolive displays worldwide which are quite interesting to see and compare around the world.
I have really enjoyed learning about this company as it has surprised and impressed me with its approach to many current issues. It appears to be a company that is committed to growing ethically and responsibly and its transparency is impressive. Demand for Colgate-Palmolive products is likely going to be steady in the foreseeable future, recognizing that large growth will be a challenge is this stable market.
· As stated many times on this site, I, nor ZSM Creative Inc. operating as The Capital Pink, are financial advisors and have no financial accreditations. I am applying some basic evaluation tools to this stock along with some commentary but this should only serve as a starter for your further research. The information below is only current to the day this post was written which may or may not be the same day as this post was published so please update the ratios and numbers to the current day before relying on them as they may have significantly changed (see How Do I Evaluate a Stock? (Part One) for information on where to find the ratios and numbers online). Please read my Legal Disclaimer. Also, I do not own Colgate Palmolive stock and am not affiliated with them in any manner.
What is Colgate-Palmolive’s stock doing?
As at March 12, 2018, the numbers from our basic stock evaluation tools are as follows:
Share price: $71.08 USD
One share of Colgate-Palmolive would cost you $71.08 USD. The price over the past 52 weeks has ranged from $68.19 to $77.91 USD.
Price to Earnings (P/E): 31.25
Recall this is the stock price divided by the earnings per share. If the P/E is high, you should expect to get some growth for having paid a bit more for the stock however, it could indicate the stock is overvalued. Not surprisingly, Colgate-Palmolive’s P/E over the past five years has remained fairly consistent with an average over the last 5 years of 30.62. The Index P/E is 21.40 so Colgate-Palmolive is a bit higher than the index. As large growth is unlikely from a company like Colgate-Palmolive, this slightly high P/E may mean something else, potentially that it is a bit overvalued.
Dividend Yield: 2.30
Dividend paying stocks are something many investors look to buy as they are like an interest rate on your shares. Dividend payouts are discretionary. Dividend yield represents the amount the company pays out in dividends relative to its share price. While a higher dividend yield is usually more desirable, you still need to consider the health of the underlying company before making a generalization either way. Colgate-Palmolive currently pays a dividend per share of 1.60 and has a trailing dividend yield of 2.30. This is consistent with its 5-year average of 2.17. Recall it is has consistently increased its dividend over the past 55 years.
Earnings per Share (EPS): 2.28 (Diluted TTM)
This figure will tell you a great deal about the growth of the company. It takes what the company earns and divides it by the number of shares outstanding. It is essentially the profit allocated to each share of the company. The bigger the number the better because the more the company earns, the more attractive it is to investors. EPS that is increasing every quarter shows earnings momentum and shows growth potential. Colgate-Palmolive’s 5-year EPS growth is actually a small negative figure at -0.02%. Growth is slowing somewhat as you can see from the Revenue figures below as well.
Revenue: $15.45 Million (TTM)
Increasing revenue is a good sign that the company is growing. Colgate-Palmolive’s revenue has stayed fairly constant with a small slowdown as its five-year growth is coming in at -1.99%. This is not surprising because while these types of products will always have demand, I would guess that competition, particularly in the natural product side of things, is hampering great strides in growth. As well, the markets for these products are relatively stable so huge gains will become increasingly difficult.
Return on Equity (ROE): --
ROE tells you what sort of return the company is getting on the shareholders money. An increasing ROE is a good sign. No ROE metric is available at this time for Colgate-Palmolive (I am not sure why Morningstar is not reporting the figure).
Market Capitalization: 62.16 Billion
Colgate is a large cap stock. Recall that small cap stocks usually have the most room for growth as opposed to large, established, stable large cap companies and medium fall somewhere in the middle. As pointed out in the discussion above, Colgate is a massive company and growth will be slower.
Net Profit Margin: 13.10 (TTM)
This ratio tells us what profit is left over after the company pays its expenses for the year. The more money it keeps, the better. High net profit margins mean that a company is good at keeping profit after expenses are paid, which may mean they are adept at keeping their expenses down. It is a good idea to compare these over an industry to see what companies are good at operating and maintaining a high net profit margin.
Cash Flow per Share: 2.85
Recall that this number is the cash flow through the business divided by the number of shares outstanding. It represents the net cash a company can produce per share and many investors consider this a better indicator of a company’s health than the more popular, earnings per share ratio because it is more difficult to manipulate cash flow numbers than it is earnings numbers. A higher value usually indicates the company is in a healthier position.
This ratio should be considered along with the EPS figure for a better picture of the company’s health as there should not be a wide discrepancy between the two figures. If there are large variances between those numbers, you may want to consider if there were large, non-recurring one-time items that account for the large variance. It is also wise to look at a company’s cash flow picture in the long term as that should take into account one-time, large capital expenditures (money spent by a company to buy or maintain an asset like land, buildings or equipment, i.e. “fixed assets”) that required large amounts of cash.
Price to Sales (P/S): 4.09
This ratio compares the total market value of the company with its sales revenues. There is not a great deal of manipulation a company can do with its sales data so this can be a good indicator of how well the company is doing. Recall that a lower ratio relative to its peers in the industry can indicate a potentially good investment opportunity. Morningstar indicates the index is 2.13 so Colgate-Palmolive is somewhat higher than the index.
Price to Book (P/B):--
This compares the stock price with how much the stock would be worth if the company was liquidated or sold off. It is the value of the stock in comparison to the underlying assets of the company. Thus, a low P/B relative to the stock price suggests you are not paying too much for what would be left over after such a sell off. Morningstar is also not reporting a figure for Colgate-Palmolive on its P/B.
Price to Cash Flow (P/CF): 20.71
Having cash left over after expenses are paid off is crucial to remaining in business so this is a good indicator about the health of a company. Generally lower is better as it could indicate the company is obtaining large cash flows not yet reflected in the stock price. Morningstar indicates the index is 13.75 so Colgate is higher on this metric.
This completes a basic evaluation of Colgate-Palmolive. As always, there are tons of articles and discussions online about this stock and all stocks, so they are also a good place to look at for further consideration. After reading its online investor material, I will definitely look at Colgate-Palmolive in a different light! For such a huge company, it is encouraging to see the strides it is attempting to make in ethics, environmentalism, gender diversity, work/life, etc. I was pleasantly surprised. While I think the growth of all of their products will continue to be slower, demand will remain and it has remained relevant in our homes since 1806.
*****Top photo courtesy of Steve Huntington on Unsplash