Current Price: ~ $71/share
Yield: ~ 3.46%
For nearly 100 years, Clorox has operated in the household product industry, expanding its portfolio to include such leading brands as Clorox, Glad, Hidden Valley, and Kingsford. The firm distributes its products through mass merchants, grocery stores, and other retail outlets. With its acquisition of Burt's Bees in 2007, Clorox gained entry into the fastgrowing natural personalcare category. International sales amount to 20% of the firm's consolidated total.
Estimated WACC for the firm today is 5.08% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year

FCF
$Millions

2003

598

2004

727

2005

614

2006

342

2007

562

2008

560

2009

541

2010

616

2011

470

2012

420

Average Annual Growth FCF: ~ 0%
CAGR FCF: ~ 4%
Consensus Forecast Industry 5Year Growth: ~ 14% per year
Consensus Forecast Company 5Year Growth: ~ 8% per year
Internal Growth Rate: ~ 5.5%
Scenario 1
 Start at $420 million FCF
 Assume a 5year growth rate in FCF of 8% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
The firm's future free cash flows, discounted at a WACC of 5.08%, give a present value for the entire firm (Debt + Equity) of $12524 million. If the firm's fair value of debt is estimated at $2606 million, then the fair value of the firm's equity could be $9918 million. $9918 million / 130 million outstanding shares is approximately $76 per share and a 20% margin of safety is $61/share.
Year

FCF
$Millions

0

420

1

454

2

490

3

529

4

571

5

617

Terminal
Value

13121

The firm's future free cash flows, discounted at a WACC of 5.08%, give a present value for the entire firm (Debt + Equity) of $12524 million. If the firm's fair value of debt is estimated at $2606 million, then the fair value of the firm's equity could be $9918 million. $9918 million / 130 million outstanding shares is approximately $76 per share and a 20% margin of safety is $61/share.
Scenario 2
All else being equal,
All else being equal,
 Assume a 5year growth rate in FCF of 4% per year, then 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
Year

FCF
$Millions

0

420

1

437

2

454

3

472

4

491

5

511

Terminal
Value

10462

 Present Value of the entire firm (Debt + Equity): $10203 million
 Value of Equity: $7597 million or $58/share
 20% margin of safety is $46/share
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.