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Investment Q&A

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Q: I would like your thoughts on CL. I have had it for three years and it has done nothing until recently, with a 2% div. I feel I should take my small gain and move on. If you agree, do you have better consumer stocks I should consider. Or should I just add to my COST and ATD holdings.

Asked by Gordon on May 03, 2024

5i Research Answer:

CL is a well-established consumer brand company that is trading at 26x Forward P/E. CL has done quite well recently as growth accelerates organically. The balance sheet is strong with net debt/EBITDA of 1.5x. The company generates healthy cash flow which is returned mostly through buyback and dividends. CL hits most of the points for a great consumer company. That said, its hefty valuation could make a strong return going forward less likely, and we think CL could accomplish around 10% on average, and we are okay to hold the majority of the position here, but would be opportunistically trim some to add to ATD, which we think is also a great name that is currently trading at a discount.

Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in COST.

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