Why Colgate-Palmolive (CL) Is Getting Attention Again
Colgate-Palmolive (CL) recently closed at $91.95, drawing attention from investors reviewing its latest financial profile. The company reports revenue of $21.0b and net income of $2.0b, supported by annual revenue and net income growth figures.
See our latest analysis for Colgate-Palmolive.
Over the past year Colgate-Palmolive’s share price return has been positive, with an 18.36% year to date share price gain and a 10.79% total shareholder return over 12 months, suggesting momentum has been building rather than fading.
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After a strong 18.36% year to date move, the question for Colgate-Palmolive is whether most of the easy gains are already in the rearview mirror, or whether the current valuation still leaves meaningful upside on the table.
Most Popular Narrative: 6.3% Overvalued
Colgate-Palmolive’s most followed narrative places fair value at $86.48 compared with the last close at $91.95, which puts the current price modestly above that estimate and frames the recent share price strength in a different light.
The operating business is running ahead of the tape. Second quarter net sales rose 4.9% to $5.36 billion with organic sales up 2.4%, Base Business EPS up 8% to $0.99, and gross margin up 140 basis points to 61.5%. That extended the earnings beat streak to five quarters, with volume growth accelerating for a third consecutive quarter. Free cash flow rose 18% through the first half, and management raised full year gross margin guidance to roughly flat against a prior expectation of decline, while increasing advertising at a double digit rate.
The fair value call here leans heavily on how fast revenue compounds, how much profit margin can be held, and what future earnings multiple the market is willing to pay. The narrative for Colgate-Palmolive quietly adjusts each of those levers. The result is a valuation outcome that sits close to, but not identical with, today’s price.
Result: Fair Value of $86.48 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Colgate-Palmolive still faces pressure if North American organic sales remain weak or if another skin health impairment signals deeper issues in that business.
Find out about the key risks to this Colgate-Palmolive narrative.
Another View Using the SWS DCF Model
While the most followed narrative on Colgate-Palmolive points to a fair value of $86.48 and labels the stock as 6.3% overvalued, the SWS DCF model reaches a very different conclusion. At $91.95, Colgate-Palmolive is described as trading 29.7% below an estimated future cash flow value of $130.82, which points to an undervalued picture instead. Which lens do you think better fits how you assess long term cash generation?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Colgate-Palmolive for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 50 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
The mixed signals around Colgate-Palmolive can feel confusing, so it helps to move quickly, review the data yourself, and weigh both sides. To see a concise breakdown of the main concerns alongside the potential upsides, take a close look at the 3 key rewards and 3 important warning signs
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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