Colgate-Palmolive trades at $92.24 and has moved in lockstep with the market. Its shares have returned 11.2% over the last six months while the S&P 500 has gained 8.4%.
Is now a good time to buy CL? Find out in our full research report, it’s free.
Why Does CL Stock Spark Debate?
Formed after the 1928 combination between toothpaste maker Colgate and soap maker Palmolive-Peet, Colgate-Palmolive (NYSE: CL) is a consumer products company that focuses on personal, household, and pet products.
Two Things to Like:
1. Elite Gross Margin Powers Best-In-Class Business Model
At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.
Colgate-Palmolive has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 60.4% gross margin over the last two years. That means for every $100 in revenue, only $39.57 went towards paying for raw materials, production of goods, transportation, and distribution.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Colgate-Palmolive has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 17.8% over the last two years.
One Reason to Be Careful:
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 Colgate-Palmolive’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 3.6% year on year. 
Final Judgment
Colgate-Palmolive’s merits more than compensate for its flaws. At $92.24 per share (or 23.9× forward P/E), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
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