Church & Dwight Co Inc Valuation – February 2019 $CHD

Company Profile (excerpt from Reuters): Church & Dwight Co., Inc., incorporated on December 14, 1925, develops, manufactures and markets a range of household, personal care and specialty products. The Company’s segments include Consumer Domestic, Consumer International and Specialty Products Division (SPD). The Company sells its consumer products under a range of brands through a distribution platform that includes supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, dollar, pet, and other specialty stores and Websites. The Company also sells specialty products to industrial customers and distributors. The Company’s brands include ARM & HAMMER, which is used in multiple product categories, such as baking soda, cat litter, carpet deodorization and laundry detergent; TROJAN condoms, lubricants and vibrators; OXICLEAN stain removers, cleaning solutions, laundry detergents, dishwashing detergent and bleach alternatives; SPINBRUSH battery-operated and manual toothbrushes; FIRST RESPONSE home pregnancy and ovulation test kits; NAIR depilatories; ORAJEL oral analgesics; XTRA laundry detergent, and BATISTE dry shampoo. It also offers the combination of the L’IL CRITTERS and VITAFUSION brand names for the Company’s gummy dietary supplement business.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CHD – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,335,096,318 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 136.02% Pass
6. Moderate PEmg Ratio PEmg < 20 28.46 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.83 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.08 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $2.33
MG Growth Estimate 9.47%
MG Value $63.98
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $33.80
MG Value based on 0% Growth $19.82
Market Implied Growth Rate 9.98%
Current Price $66.34
% of Intrinsic Value 103.69%

Church & Dwight Co., Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.43 in 2015 to an estimated $2.33 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 9.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Church & Dwight Co., Inc. revealed the company was trading above its Graham Number of $23.34. The company pays a dividend of $0.87 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 28.46, which was below the industry average of 50.15, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.05.

Church & Dwight Co., Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.05
Graham Number $23.34
PEmg 28.46
Current Ratio 0.81
PB Ratio 6.83
Current Dividend $0.87
Dividend Yield 1.31%
Number of Consecutive Years of Dividend Growth 14

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,078,200,000
Total Current Liabilities $1,326,300,000
Long-Term Debt $1,508,800,000
Total Assets $6,069,200,000
Intangible Assets $4,266,900,000
Total Liabilities $3,615,400,000
Shares Outstanding (Diluted Average) 252,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.43
Dec2018 $2.27
Dec2017 $2.90
Dec2016 $1.75
Dec2015 $1.54
Dec2014 $1.51
Dec2013 $1.40
Dec2012 $1.23
Dec2011 $1.06
Dec2010 $0.94
Dec2009 $0.85
Dec2008 $0.70
Dec2007 $0.62
Dec2006 $0.52
Dec2005 $0.46
Dec2004 $0.34
Dec2003 $0.32
Dec2002 $0.27
Dec2001 $0.19
Dec2000 $0.14
Dec1999 $0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.33
Dec2018 $2.19
Dec2017 $2.04
Dec2016 $1.56
Dec2015 $1.43
Dec2014 $1.32
Dec2013 $1.19
Dec2012 $1.04
Dec2011 $0.91
Dec2010 $0.79
Dec2009 $0.69
Dec2008 $0.58
Dec2007 $0.50
Dec2006 $0.42
Dec2005 $0.36
Dec2004 $0.29
Dec2003 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Church & Dwight Co Inc Valuation – April 2018 $CHD
Church & Dwight Co Inc Valuation – Initial Coverage $CHD

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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