Colgate-Palmolive trades at $92.78 per share and has stayed right on track with the overall market, gaining 6% over the last six months. At the same time, the S&P 500 has returned 5%.

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. 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 16.3% over the last two years.

2. Stellar ROIC Showcases Lucrative Growth Opportunities

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Colgate-Palmolive’s five-year average ROIC was 39.7%, placing it among the best consumer staples companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

One Reason to be Careful:

Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Colgate-Palmolive’s sales grew at a tepid 4.5% compounded annual growth rate over the last three years. This wasn’t a great result compared to the rest of the consumer staples sector, but there are still things to like about Colgate-Palmolive.

Final Judgment

Colgate-Palmolive’s positive characteristics outweigh the negatives, but at $92.78 per share (or 24.7× forward P/E), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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