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Church & Dwight Co Inc CHD

Morningstar Rating
$100.12 +0.23 (0.23%)
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Company Report

Church & Dwight Earnings: Sales Growth Fails to Presage Subdued Competitive Backdrop; Shares Rich

On the surface, no-moat Church & Dwight posted decent fourth-quarter results—5.3% organic sales growth and a 260-basis-point bump in gross margin to 44.6%. However, the firm was lapping tepid year-ago performance, when organic sales edged up a mere 40 basis points. And, in our view, Church’s category mix makes the firm susceptible to consumers trading down or out if their financial position warrants. Beyond the top line, we surmise reaching its 45% prepandemic gross margin could be spoiled by intensifying competition (from larger and better-resourced peers and lower-priced private-label offerings) if promotional spending steps up from relatively dormant levels the past few years. As a smaller operator with less entrenched retail relationships, we think this could put Church in the crosshairs, making further margin expansion harder to come by. Further, while inflationary headwinds in aggregate have died down, labor, transportation, and logistics remain elevated and could put added pressure on its margin trajectory.

Price vs Fair Value

CHD is trading at a 56% premium.
Price
$100.12
Fair Value
$55.00
Uncertainty
Medium
1-Star Price
$13.70
5-Star Price
$72.40
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Pandemic-related pantry stocking boosted sales for laundry detergent and vitamins, and we think these sales could continue as consumers prioritize health and cleanliness (particularly to the extent the cold and flu season proves severe).

Bears

We expect promotions will ultimately return to historical levels, which would dampen sales and gross margins.

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News

Trading Information

Previous Close Price
$99.89
Day Range
$99.59100.48
52-Week Range
$82.25101.79
Bid/Ask
$98.73 / $103.19
Market Cap
$24.41 Bil
Volume/Avg
767,804 / 1.4 Mil

Key Statistics

Price/Earnings (Normalized)
31.68
Price/Sales
4.22
Dividend Yield (Trailing)
1.10%
Dividend Yield (Forward)
1.13%
Total Yield
2.33%

Company Profile

Church & Dwight is the leading global producer of baking soda. Beyond baking soda, the products in its portfolio have vast category reach, including laundry products, cat litter, oral care, deodorant, and nasal care, all sold under the Arm & Hammer brand. Its mix also includes Xtra, Trojan, OxiClean, First Response, Nair, L’il Critters/Vitafusion, Orajel, and WaterPik, which together with Arm & Hammer constitute more than 80% of its annual sales and profits. In early 2019, the firm announced the addition of Flawless, which manufactures electric shaving products for women. At the end of 2020, the firm acquired Zicam, a leading brand in the cough/cold-shortening category. Church & Dwight derives more than 80% of its sales from its home market in the U.S.
Sector
Consumer Defensive
Industry
Household & Personal Products
Stock Style Box
Mid Core
Total Number of Employees
5,550

Competitors

Valuation

Metric
CHD
RKT
PG
Price/Earnings (Normalized)
31.6816.3825.02
Price/Book Value
6.314.567.89
Price/Sales
4.222.794.72
Price/Cash Flow
23.8414.8519.76
Price/Earnings
CHD
RKT
PG

Financial Strength

Metric
CHD
RKT
PG
Quick Ratio
0.610.350.40
Current Ratio
1.080.540.64
Interest Coverage
9.7211.8820.66
Quick Ratio
CHD
RKT
PG

Profitability

Metric
CHD
RKT
PG
Return on Assets (Normalized)
9.58%8.53%13.58%
Return on Equity (Normalized)
21.40%26.40%35.76%
Return on Invested Capital (Normalized)
14.37%14.13%20.36%
Return on Assets
CHD
RKT
PG
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