3 Reasons to Sell CLX and 1 Stock to Buy Instead

Clorox trades at $126.98 per share and has stayed right on track with the overall market, gaining 5.8% over the last six months. At the same time, the S&P 500 has returned 7.7%.

Is there a buying opportunity in Clorox, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Clorox Not Exciting?

We're sitting this one out for now. Here are three reasons we avoid CLX and a stock we'd rather own.

1. Revenue Spiraling Downwards

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Clorox’s demand was weak and its revenue declined by 1.5% per year. This wasn’t a great result and signals it’s a lower quality business.

2. Slow Organic Growth Suggests Waning Demand In Core Business

When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.

The demand for Clorox’s products has been stable over the last eight quarters but fell behind the broader sector. On average, the company has posted feeble year-on-year organic revenue growth of 1.9%.

3. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Clorox’s revenue to stall. While this projection suggests its newer products will fuel better top-line performance, it is still below average for the sector.

Final Judgment

Clorox isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 19.1× forward P/E (or $126.98 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.

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