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Clorox (CLX) Could Be 12% Undervalued Following CFO Dividend Pledge

Simply Wall St · 2d ago

Clorox (CLX) is back in focus after its CFO reaffirmed plans to keep raising the dividend, even as recent payouts exceeded free cash flow and net debt climbed following the GOJO acquisition.

That commitment to the payout is coming as Clorox’s share price tells a more cautious story. The stock trades at US$85.56, with the 30-day share price return up 2.96%, while the 90-day share price return is down 10.59% and the year-to-date share price return is down 15.16%. Total shareholder return has also moved lower, with the 1-year total shareholder return down 25.12% and the 5-year total shareholder return down 36.90%. This signals fading momentum even before factoring in the higher net debt from GOJO and the reliance on a future free cash flow recovery to support ongoing dividend increases.

Compare Clorox’s stretched payout with other income options and scan for 8 dividend fortresses that pair higher yields with sturdier free cash flow coverage.

Clorox now trades well below one valuation model and at a discount to the average analyst target, while the payout strain, higher net debt and weak long term returns point the other way. Which side has the stronger case?

Most Popular Narrative: 12% Undervalued

Clorox’s most followed narrative pegs fair value at $97.47, which sits above the last close at $85.56 and frames the current gap as a valuation opportunity that depends heavily on execution in health and hygiene.

The main thing that has to go right is that Clorox turns its larger health and hygiene platform, including GOJO and Clorox Healthcare, into sustained growth and profitability while managing persistent cost inflation and value seeking consumer behavior.

The current valuation implies investors are pricing Clorox as if margin pressure, muted category growth, and legal or governance overhangs will weigh more heavily on the share price than the potential upside from health and hygiene growth, ERP driven productivity, and GOJO accretion.

See why 45 investors see Clorox as 12% undervalued.

Result: Fair Value of $97.47 (UNDERVALUED)

Still, the ERP rollout and GOJO integration could disappoint if rising input costs bite harder than expected and value focused shoppers continue to pressure Clorox’s pricing power.

Find out about the key risks to this Clorox narrative.

Next Steps

Sentiment on Clorox is clearly split, and the numbers point in both directions, so check the underlying data now and weigh those crosscurrents yourself by reviewing the 2 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Clorox?

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