So one of the companies I’ve actually watched over the past 2 years is Colgate-Palmolive. You will know them for their toothpastes and toothbrush brands but they actually have more in their portfolio of product than that. They have household cleaning products, pet food and soap brands just to name a few. But in 2016 Colgate-Palmolive received the “America’s Top 50 Organizations for Multicultural Business Opportunities” award and this actually made me look a bit closer in the company despite its boring operations and metrics. This award considers the volume, consistency and quality of business opportunities given to women and minority owned companies to work with large corporations. I was thrilled to read Colgate-Palmolive and I have shared values for inclusion in the workplace. So lets dive in…
Company Snapshot
Name: Colgate-Palmolive (as of close 6/8/2016)
Ticker: CL
Current Price: $72.00
52 Week High Price:$72.72
52 Week Low Price: $50.84
Market Capitalization: $63.93B (Large Capital)
Price/Earnings (P/E Ratio): 47.22
Earnings/Share (EPS): $1.52
Dividend: $1.56/year (2.18% yield)
Industry: Consumer Goods
Primary Business: Personal Products
The Good, The Bad and The Ugly
Not only is Colgate-Palmolive a beacon for diversity, it is also considered one of the most innovate companies and a company with one of the most highly reputable supply chain operations. Having a good supply chain means you have positive relationships with people you supply you with material you need to make sure the product is quality and delivered in a timely manner. It also indicates that you have strategized a cost efficient way of designing your products without breaking the bank.
Or so you would think.
Unfortunately for the past 3 consecutive years revenues have decreased. Despite gross profit margins remaining relatively the same, there are other red flags I see when looking at the financial statements, in particular the balance sheet. In 2015, there is a negative total shareholders equity. If you haven’t been exposed to much accounting or finance, it may serve you well to show you the equation in which all things come from:
Assets = Liabilities + Shareholder Equity
For the shareholder equity to be negative, there has to be more liabilities than assets. Can you see that? Let’s rearrange the equation to try to make it more clear:
Assets – Liabilities = Shareholder Equity
So if you have $500k of assets but you have $600k of liabilities, you will have -$100k of shareholder equity. I honestly don’t think I’ve seen this happen outside of my accounting book back in 2013. So to see this came as a surprise that shareholder equity could actually be negative in real life. A closer look shows that the company has been buying back shares from its shareholders over the past few years (looks like it has been buying shares back since 2011) and in 2015 it bought back more than they had in previous years. I personally feel like they should raise the dividend instead of buying back shares, but that’s just my perspective on the companies that play in this sector like Proctor & Gamble. I just feel like they’re retirement level stocks that are pretty safe and should continue to be dividend rich companies. That’s just my perspective though. Colgate-Palmolive is something I think my dad would invest in. I would too, but I’m good on dividend paying stocks for now. I need a jolt of growth that I don’t think Colgate-Palmolive can provide me with at this point.
Until next post…
X is for Xcellent 