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+--- Thread: Colgate (CL) Question (/showthread.php?tid=660)
Colgate (CL) Question - TomK - 08-28-2014
Can anyone explain to me why CL trades at such a high multiple? I'm just not understanding it. I know it has a huge streak of dividend increases and that it is a reliable dividend paying consumer staple. But other than that, the yield is not that exciting, the earnings have completely stalled, making little progress since about 2009, and the payout ratio has been climbing steadily to support the dividend increases.
So why is it trading at a p/e of 27, when so many other consumer staple dividend growth champs are trading in the 19-22 p/e range? Have I missed some news or some other differentiating factor? What gives?
Thanks.
RE: Colgate (CL) Question - EricL - 08-28-2014
(08-28-2014, 10:09 AM)TomK Wrote: Can anyone explain to me why CL trades at such a high multiple? I'm just not understanding it. I know it has a huge streak of dividend increases and that it is a reliable dividend paying consumer staple. But other than that, the yield is not that exciting, the earnings have completely stalled, making little progress since about 2009, and the payout ratio has been climbing steadily to support the dividend increases.
So why is it trading at a p/e of 27, when so many other consumer staple dividend growth champs are trading in the 19-22 p/e range? Have I missed some news or some other differentiating factor? What gives?
Thanks.
The PE is only 22 when using expected 2014 earnings of $2.96 and a forward PE of 20 for 2015 estimates of $3.27. I don't know why the Yahoo main page shows a PE of 27. Its still a bit expensive, but not overly so compared to other blue chips.
The 15 year chart on FAST Graphs shows a historical EPS growth rate of 8.8% and an expected growth rate of 9.3% and a normal PE of 21.6 during the period.
I would say the stock is trading right around fair value, probably a bit on the high end of the range. I don't own the stock, but would begin getting interested if it dipped down to the 2.5% yield range, or around $58.
RE: Colgate (CL) Question - TomK - 08-28-2014
Thanks Eric, I appreciate the response. I also don't understand the $2.96 projection for 2104. Based on first two quarters, they are on pace to match 2013's $2.38 in earnings (using reported rather than "adjusted" numbers), not beat it by 24 percent.
RE: Colgate (CL) Question - EricL - 08-28-2014
(08-28-2014, 11:11 AM)TomK Wrote: Thanks Eric, I appreciate the response. I also don't understand the $2.96 projection for 2104. Based on first two quarters, they are on pace to match 2013's $2.38 in earnings (using reported rather than "adjusted" numbers), not beat it by 24 percent.
Looking at yahoo finance.
https://finance.yahoo.com/q/ae?s=CL+Analyst+Estimates
They have made $1.41 in first half of year ($0.68+$0.73) and are estimated to earn $0.77 and $0.79 in Q3 and Q4, which gives a combined total of $2.97 for the year.
Price of $64.54 gives a PE of 21.7 based on expected 2014 earnings.
RE: Colgate (CL) Question - Dividend Watcher - 08-28-2014
I too came up with a ttm P/E of 22 using GAAP reported earnings. Have no idea if there were any extraordinary items in there.
I think part of the slightly higher valuation over its peers (PG seeming to be the natural first pick as a rival) is because of a myriad reasons. 1.) CL, at first glance, was the faster grower of the last couple of decades. I would guess that there is more growth expected out of CL than PG in the near future also. 2.) I think they became better positioned than PG in emerging markets. 3.) Their dividend growth rate has been slightly higher than PG's according to longrundata. 4.) Fewer "stumbles" with products/pricing/acceptance than PG. There are probably many more reasons and it's as much perception as reality.
If I was going to pay those multiples, I'd be leaning more to CHD than CL, but their starting yield is even lower yet a very interesting growth story. Of course, higher growth can lead to a misstep that could cause the price to be more volatile.
RE: Colgate (CL) Question - Robandcindy2 - 09-03-2014
CL traditionally trades at or above it's normal PE ratio (15 year is 21.2)(10 year is 19.7)(5 year 18.9).
Personally it is a buy between $44 and $56...and 10 years from now????
On 1/31/06 it traded at $27.24. Not even 8 years later $64+....
Deep into Recession '08-'09 it was still above $30.
IMHO, it is just one of those stocks that if you just gotta have it, and the business is still sound, you pick yourself a range and pull the trigger in the range on a dip. Then close your spreadsheet and don't look back ...at least for a while.
51 years of consistent dividend increase? What's not to like?
RE: Colgate (CL) Question - Dividend Watcher - 09-03-2014
I agree with you, Rob, especially if I were a wee bit younger. Still mulling that one but will hold PG and UL for now.