Is Clorox a Safety Net?

With shares of The Clorox Company (NYSE:CLX) trading at around $83.85, is CLX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Would you like to invest in a company that has seen 63 price increases since 2005? How about a company that has goals of 3 to 5 percent annual growth and plus 25 to plus 50 annual EBIT margin expansion? Is that not enough? Wow, you have really high expectations. But that’s okay, because we’re not done. This is a company that recently beat expectations and offered strong guidance. Revenue and gross margin also increased year-over-year. What if the ROI was also well above the industry average at 31.2 percent? Would that sell you? If your interest hasn’t been piqued yet, then you might want to look elsewhere. If this sounds like a company you might want to consider investing in, then hang around. It will be a painless five minutes. Maybe even four minutes, if you’re a fast reader.

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Clorox is enjoying brand dominance and pricing power at the moment. Right now, it’s good to be Clorox, especially since the company will be celebrating its one hundredth birthday on May 3 of this year. Maybe the company can offer you a present instead of the other way around. This is a company with strong FY 2013 guidance. Clorox recently increased its sales growth forecast to 3 to 5 percent from 2 to 4 percent. EPS expectations have also increased from $4.20 to $4.35 to $4.25 to $4.35. In addition to that, Clorox expects strong cost savings, continued price increases and flat commodity costs. However, Clorox isn’t all perfect. Expenses have increased due to IT investments, and there is one other number we will look at that is cause for concern. It can be found on the next page.