The stock of household cleaning and product firm Clorox (NYSE:CLX) was badly lagging the market earlier this year, but has remained somewhat steady while the stock market has entered another period of volatility. This speaks to the stability of its product mix, which counts as basic necessities to most consumers. The valuation isn’t compelling, but the dividend yield is, as is the downside protection that the shares offer.


Recent Developments
Earlier in May, Clorox reported third quarter results. Sales grew 7% to $1.4 billion and product volumes advanced 4%. The company reports its results in four business segments and reported positive growth in each one. Sales advanced 10% in the cleaning and lifestyle segments that house the namesake bleach brand and Brita water filters, respectively. International was the surprising laggard, though it still reported a respectable 4% sales growth.

SEE:Understanding The Income Statement

Despite the positive sales growth, pre-tax profits fell 9.6% to $134 million. Net income fell a slightly more severe 12.6% to $132 million, though share buybacks helped the profit decline fall back into the single digits at 7.3%. Earnings per diluted share is $1.02. The primary culprit was a 49% profit slump at the international unit.

SEE: A Breakdown Of Stock Buybacks

Outlook and Valuation
Analysts project full year 2012 profits of $4.04 per share and sales growth of 4.3% for total sales of nearly $5.5 billion. They expect similarly modest top-line growth of 3.6% in 2013, total sales of $5.7 billion and profits of $4.27 per share, which would represent an annual growth of just below 6%.

Based on the current share price, just below $69 per share, the forward P/E for these two annual periods currently stands at 17.1 and 16.2. This is above the market’s current forward earnings multiple of 13.6, but still below Clorox’s five year average multiple of 18.6.

SEE: 5 Must-Have Metrics For Value Investors

The Bottom Line
Clorox isn’t growing rapidly, but it’s posting respectable sales growth that it should be able to leverage into high single digit profit growth over the long haul. And while it is lagging the market, so far this year, other rivals including Procter & Gamble (NYSE:PG) and Unilever (NYSE:UN) (NYSE:UL) have seen stock declines. Only Kimberly-Clark (NYSE:KMB) has done better so far in 2012. All have dividend yields close to 4%. As the smallest player among this peer group, Clorox stands a better chance at posting higher growth going forward, though all offer downside protection given the stable demand for their underlying products.

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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