Resources

CL – Market expectations are for Uniform ROA to reach new peaks, but management may be concerned about revenue growth, inventory management, and care product demand

March 3, 2021

  • Colgate-Palmolive Company (CL:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 22.8x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about the top-line growth, inventory management, and the sustainability of Personal and Home care product demand
  • Specifically, management may lack confidence in their ability to expand premium toothpaste segment market share in Brazil, sustain gross profit margin growth, and manage logistics costs. Moreover, they may be concerned about the sustainability of e-commerce revenue growth, category inventory level management, and sales declines in their brick-and-mortar channels. Furthermore, they may lack confidence in their ability to deliver operating margin growth through revenue expansion, focus on specific brand categories with higher growth potential, and drive top-line organic growth. In addition, management may have concerns about the sustainability of Personal and Home Care product demand and they may be exaggerating the potential and innovativeness of their Prescription Diet business