Colgate-Palmolive Co: $CL Cash Flow Valuation Update

Current Price: ~ $104/share
Projected Yield: ~ 2.39%


Colgate-Palmolive is one of the world's largest consumer product companies. In addition to its namesake toothpaste and detergents, the firm manufactures shampoos, shower gels, deodorants, and shaving products. It also owns specialty pet food maker Hill's, which sells its products through veterinarians and specialty pet retailers. Colgate's products are sold around the world; about three quarters of sales come from outside the United States.

Estimated WACC for the firm today is 5.02% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year	FCF $Millions
2002	1268
2003	1466
2004	1406
2005	1395
2006	1345
2007	1621
2008	1555
2009	2702
2010	2661
2011	2359

Average Annual Growth FCF: ~ 9%

CAGR FCF: ~ 7%

Consensus Forecast Industry 5-Year Growth: ~ 12% per year

Consensus Forecast Company 5-Year Growth: ~ 9% per year

Internal Growth Rate: ~ 12%

Scenario 1

• Start at $2359 million FCF
• Assume a 5-year growth rate in FCF of 9% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	2359
1	2571
2	2803
3	3055
4	3330
5	3630
Terminal Value	78737

The firm's future cash flows, discounted at a WACC of 5.02%, give a present value for the entire firm (Debt + Equity) of $74824 million. If the firm's fair value of debt is estimated at $5292 million, then the fair value of the firm's equity could be $69532 million.  $69532 million / 477 million outstanding shares is approximately $146 per share and a 20% margin of safety is $117/share.

Scenario 2
All else being equal,

• Assume a 5-year growth rate in FCF of 5% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	2359
1	2477
2	2601
3	2731
4	2867
5	3011
Terminal Value	62915

• Present Value of the entire firm (Debt + Equity): $61025 million
• Value of Equity: $55733 million or $117/share
• 20% margin of safety is $94/share

Sources

Morningstar.com

Yahoo! Finance

Colgate.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Colgate-Palmolive Co: $CL cash flow valuation update

Current Price: ~ $90/share
Projected Yield: ~ 2.58%



Colgate-Palmolive is one of the world's largest consumer product companies. In addition to its namesake toothpaste and detergents, the firm manufactures shampoos, shower gels, deodorants, and shaving products. It also owns specialty pet food maker Hill's, which sells its products through veterinarians and specialty pet retailers. Colgate products are sold around the world; about three fourths of sales come from outside the United States.    

I estimated the firm's WACC today at 5.68% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year	FCF $Millions
2001	1259
2002	1268
2003	1466
2004	1406
2005	1395
2006	1345
2007	1621
2008	1555
2009	2702
2010	2661
TTM	2469

Average Annual Growth FCF: ~ 11%

CAGR FCF: ~ 9%

Consensus Forecast Industry 5-Year Growth: ~ 12% per year

Consensus Forecast Company 5-Year Growth: ~ 9% per year

Scenario 1

The company's FCF through 9 months ending 9/30/2011 is $1733 million; $2311 million annualized.  Starting at $2311 million FCF, assuming the company achieves a 5-year growth rate in FCF of 9% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	2311
1	2519
2	2746
3	2993
4	3262
5	3556
Terminal Value	68237

The firm's future cash flows, discounted at a WACC of 5.68%, give a present value for the entire firm (Debt + Equity) of $64459 million. If the firm's fair value of debt is estimated at $6400 million, then the fair value of the firm's equity could be $58059 million.  $58059 million / 487 million outstanding shares is approximately $119 per share and a 20% margin of safety is $95/share.

Scenario 2

All else being equal, discount the firm's future cash flows at a WACC of 7.00%:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	2311
1	2519
2	2746
3	2993
4	3262
5	3556
Terminal Value	55368

The firm's future cash flows, discounted at a WACC of 7.00%, give a present value for the entire firm (Debt + Equity) of $51696 million. If the firm's fair value of debt is estimated at $6400 million, then the fair value of the firm's equity could be $45296 million.  $45296 million / 487 million outstanding shares is approximately $93 per share and a 20% margin of safety is $74/share.

Sources

Morningstar.com

Yahoo! Finance

Colgate.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Colgate-Palmolive: $CL Buys Unilever Business for $940 Million

Colgate-Palmolive said on Wednesday that it had agreed to buy Sanex, the personal care unit of Unilever, for $940 million in cash, expanding its share of the skin care market in Europe.


Sources
Dealbook
Colgate-Palmolive - company news

Colgate-Palmolive: $CL valuation update

Colgate-Palmolive ($CL) filed a 10K annual report for 2010 recently so here's an update to the cash flow valuation I posted January 28.  This update incorporates the firm's year-end 2010 data.  I believe $CL is undervalued now at $78/share and fairly valued at $94/share on a cash flow valuation basis.    


Colgate-Palmolive is one of the world's largest consumer product companies. In addition to its namesake toothpaste and detergents, the firm manufactures shampoos, shower gels, deodorants, and shaving products. It also owns specialty pet food maker Hill's, which sells its products through veterinarians and specialty pet retailers. Colgate products are sold around the world; about three fourths of sales come from outside the United States.

I estimated the firm's WACC today at 8.27% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year	FCF $Millions
2000	1170
2001	1259
2002	1268
2003	1466
2004	1406
2005	1395
2006	1345
2007	1621
2008	1555
2009	2702
2010	2661

Average Annual Growth: approx 10%
CAGR: approx. 9%

Consensus Forecast Industry 5-Year Growth: approx. 13% per year
Consensus Forecast Company 5-Year Growth: approx. 9% per year

Assuming the company achieves a 5-year growth rate in FCF of 9% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:

Discounted Cash Flow Valuation

Year	FCF $ Millions
0	2661
1	2900
2	3162
3	3446
4	3756
5	4094
Terminal Value	53984

The firm's future cash flows, discounted at a WACC of 8.27%, give a present value for the entire firm (Debt + Equity) of $49,867 million. If the firm's fair value of debt is estimated at $3500 million, then the fair value of the firm's equity could be $46,367 million.  $46,367 million / 494 million outstanding shares is approximately $94 per share and a 20% margin of safety is $75/share.

Sources

Morningstar.com

Colgate.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Colgate-Palmolive: fairly valued with a margin of safety

I believe $CL, at approximately $77/share is fairly valued with a margin of safety on a cash flow valuation basis.

Colgate-Palmolive is one of the world's largest consumer product companies. In addition to its namesake toothpaste and detergents, the firm manufactures shampoos, shower gels, deodorants, and shaving products. It also owns specialty pet food maker Hill's, which sells its products through veterinarians and specialty pet retailers. Colgate products are sold around the world; about three fourths of sales come from outside the United States.
(Source: Morningstar.com)

Colgate Announces 4^th Quarter and Full Year 2010 Results 

I estimated the firm's WACC at 8.13% using the Capital Asset Pricing Model and the company's recent SEC filings.  ValuePro has a baseline WACC calculator here and it calculates the firm's WACC at 6.54%.  I'll go with the higher mark, 8.13%.    

Recent free cash flows and noted growth rates: 

Year	FCF $Millions
2000	1170
2001	1259
2002	1268
2003	1466
2004	1406
2005	1395
2006	1345
2007	1621
2008	1555
2009	2702
2010	2661

Average Annual Growth: approx 10%
CAGR: approx. 9%
Consensus Forecast Industry 5-Year Growth: approx. 11% per year
Consensus Forecast Company 5-Year Growth: approx. 9% per year

Assuming the company achieves a slightly lower 5-year growth rate of 8% per year, and assuming that after the next five years, the company achieves no growth or 0% growth per year forever:

Discounted Cash Flow Valuation

Year	FCF $ Millions
0	2661
1	2874
2	3104
3	3352
4	3620
5	3910
Terminal Value	51909

The firm's future cash flows, discounted at a WACC of 8.13%, give a present value for the entire firm (Debt + Equity) of $48,365 million. If the firm's fair value of debt is estimated at $3,750 million, then the fair value of the firm's equity could be $44,615 million.

$44,615 million / 483 million outstanding shares is approx $92 per share. A 20% margin of safety from here is approx $74 so assuming all else at $CL meets my standard for good business, I'd buy it today for the long term at $74 or less.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.