A quick and dirty valuation of Clorox $clx.

AI Summary

A conservative valuation argues Clorox has weak growth but is worth buying below $120, with fair value estimated at $120–$140.

CLX — LONG The author argues Clorox has lacked GDP-beating sales growth, using buybacks and annual dividend increases to support EPS, while post-Covid cleaning-demand normalization has hurt sales and earnings. Management guides U.S. organic sales to 0-1% growth, with negative first-half and low-single-digit second-half growth, and the author values a conservative 5% and 7% EPS growth path over 10 years at a 9% discount rate and 3% terminal growth. That produces a fair value of roughly $120-$140, leading him to say CLX is worth buying below $120. He cautions that many Redditors expect a quick turnaround, so expectations should be adjusted.

So my fair value for Clorox is around 120 to 140. I would rather buy at 120 than at 140.

Score 5

Comments 9

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**My comments:**

Clorox is suffering from a lack of growth. They have not been able to grow sales above the growth rate of the gdp. What they have been doing instead is (a) buying back shares and reducing the number of share count (b) raising their dividend every year. 

Pre-covid, they managed to grow EPS at around. 8% a year. 

During covid they did very well but has since struggled with covid normalisation (people went back to work and did less cleaning). So their sales dropped. And earnings suffered as well.

In doing a valuation, my style is to work out the conservative and pessimistic scenarios, because if under these less than ideal scenarios the fair price is higher than the share price, then I know that even if I made a mistake, it can still be covered by the cheap share price.

Start from the management guidance, no. (11) in the picture, mgmt says USA organic sales is going to be 0-1% growth, and first half of the FY ( June to end Dec) is going to have negative growth and in the 2nd half, growth is going to come back in low single digit.

In no.(12), I investigate what are the analysts nos for growth as well as eps nos. I note that since this year’s (June 202)  eps of $5.95 will be smaller than June 2025’s $7.72 actuals, it makes sense to use the smaller nos as the starting base to be conservative.  

From this low base, I calculate the growth rates from the given future eps nos (from sa and from eulerpool), they point to 8+%  cagr from 5.95 for the next 5 years.

I then work out two scenarios, one at 5% growth and one at 7% growth. 

5% growth for 10 years and a discount rate of 9% and a terminal growth of 3% works out to 20x multiple x 5.95 = $119

At 7%, the fair value is 23.5 x 5.95 =139.8

So my fair value for Clorox is around 120 to 140. I would rather buy at 120 than at 140.

Morningstar has a fair value estimate at $163 while CFRA has a puzzling $56 fair value

**conclusions**: CLX is worth to buy below $120. Just note that a lot of Redditors buy this stock and expect a quick turnaround. So adjust your expectation.

(Disclosure: I don’t own any CLX. You know where to find my portfolio.

Ideas

u/raytoei Reddit r/ValueInvesting

Clorox fair value $120-$140; buy below $120 as turnaround is slow

The author argues Clorox has lacked GDP-beating sales growth, using buybacks and annual dividend increases to support EPS, while post-Covid cleaning-demand normalization has hurt sales and earnings. Management guides U.S. organic sales to 0-1% growth, with negative first-half and low-single-digit second-half growth, and the author values a conservative 5% and 7% EPS growth path over 10 years at a 9% discount rate and 3% terminal growth. That produces a fair value of roughly $120-$140, leading him to say CLX is worth buying below $120. He cautions that many Redditors expect a quick turnaround, so expectations should be adjusted.

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Ideas

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