Church & Dwight has had an impressive run over the past six months as its shares have beaten the S&P 500 by 5.1%. The stock now trades at $96.48, marking a 12.9% gain. This run-up might have investors contemplating their next move.
Is now the time to buy Church & Dwight, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Church & Dwight Not Exciting?
We’re happy investors have made money, but we’re sitting this one out for now. Here are three reasons why CHD doesn’t excite us, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Church & Dwight grew its sales at a sluggish 4.1% compounded annual growth rate. This fell short of our benchmark for the consumer staples sector.
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 Church & Dwight’s products has generally risen over the last two years but lagged behind the broader sector. On average, the company’s organic sales have grown by 2.6% year on year.
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 Church & Dwight’s revenue to stall.This projection doesn’t excite us and indicates its products will see some demand headwinds.
Final Judgment
Church & Dwight isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 24.3× forward P/E (or $96.48 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward one of our top digital advertising picks.
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