Intrinsic value of Colgate-Palmolive - CL

Previous Close

$71.93

  Intrinsic Value

$19.12

stock screener

  Rating & Target

str. sell

-73%

  Value-price divergence*

-81%

Previous close

$71.93

 
Intrinsic value

$19.12

 
Up/down potential

-73%

 
Rating

str. sell

 
Value-price divergence*

-81%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 63.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -5.23
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  15,195
  15,499
  15,855
  16,263
  16,720
  17,227
  17,783
  18,389
  19,045
  19,751
  20,509
  21,320
  22,185
  23,106
  24,086
  25,125
  26,226
  27,391
  28,624
  29,926
  31,301
  32,752
  34,282
  35,895
  37,594
  39,384
  41,268
  43,251
  45,339
  47,534
  49,844
Variable operating expenses, $m
 
  12,798
  13,087
  13,418
  13,790
  14,202
  14,653
  15,145
  15,678
  16,251
  16,867
  17,315
  18,017
  18,766
  19,561
  20,404
  21,299
  22,245
  23,246
  24,304
  25,420
  26,599
  27,841
  29,151
  30,531
  31,985
  33,515
  35,126
  36,821
  38,604
  40,480
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  11,358
  12,798
  13,087
  13,418
  13,790
  14,202
  14,653
  15,145
  15,678
  16,251
  16,867
  17,315
  18,017
  18,766
  19,561
  20,404
  21,299
  22,245
  23,246
  24,304
  25,420
  26,599
  27,841
  29,151
  30,531
  31,985
  33,515
  35,126
  36,821
  38,604
  40,480
Operating income, $m
  3,837
  2,701
  2,768
  2,845
  2,930
  3,026
  3,130
  3,244
  3,367
  3,500
  3,642
  4,005
  4,168
  4,341
  4,525
  4,720
  4,927
  5,146
  5,377
  5,622
  5,880
  6,153
  6,440
  6,743
  7,063
  7,399
  7,753
  8,125
  8,518
  8,930
  9,364
EBITDA, $m
  4,280
  3,232
  3,306
  3,391
  3,487
  3,593
  3,709
  3,835
  3,972
  4,119
  4,277
  4,446
  4,626
  4,819
  5,023
  5,239
  5,469
  5,712
  5,969
  6,241
  6,527
  6,830
  7,149
  7,485
  7,840
  8,213
  8,606
  9,020
  9,455
  9,913
  10,394
Interest expense (income), $m
  162
  229
  185
  194
  205
  216
  229
  243
  258
  275
  292
  311
  332
  354
  377
  401
  427
  455
  484
  515
  548
  583
  619
  658
  698
  741
  786
  833
  883
  936
  991
Earnings before tax, $m
  3,738
  2,472
  2,583
  2,650
  2,726
  2,810
  2,901
  3,001
  3,109
  3,225
  3,350
  3,694
  3,836
  3,987
  4,148
  4,319
  4,499
  4,691
  4,893
  5,107
  5,332
  5,570
  5,821
  6,086
  6,364
  6,658
  6,967
  7,292
  7,634
  7,994
  8,373
Tax expense, $m
  1,152
  668
  697
  716
  736
  759
  783
  810
  839
  871
  904
  997
  1,036
  1,077
  1,120
  1,166
  1,215
  1,266
  1,321
  1,379
  1,440
  1,504
  1,572
  1,643
  1,718
  1,798
  1,881
  1,969
  2,061
  2,159
  2,261
Net income, $m
  2,441
  1,805
  1,885
  1,935
  1,990
  2,051
  2,118
  2,191
  2,270
  2,354
  2,445
  2,697
  2,800
  2,911
  3,028
  3,153
  3,285
  3,424
  3,572
  3,728
  3,893
  4,066
  4,249
  4,443
  4,646
  4,860
  5,086
  5,323
  5,573
  5,836
  6,112

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,338
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  12,123
  12,369
  12,654
  12,979
  13,344
  13,749
  14,193
  14,676
  15,199
  15,763
  16,368
  17,015
  17,706
  18,441
  19,222
  20,051
  20,930
  21,860
  22,844
  23,883
  24,981
  26,139
  27,360
  28,647
  30,003
  31,432
  32,935
  34,518
  36,184
  37,936
  39,780
Adjusted assets (=assets-cash), $m
  10,785
  12,369
  12,654
  12,979
  13,344
  13,749
  14,193
  14,676
  15,199
  15,763
  16,368
  17,015
  17,706
  18,441
  19,222
  20,051
  20,930
  21,860
  22,844
  23,883
  24,981
  26,139
  27,360
  28,647
  30,003
  31,432
  32,935
  34,518
  36,184
  37,936
  39,780
Revenue / Adjusted assets
  1.409
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
Average production assets, $m
  5,148
  5,254
  5,375
  5,513
  5,668
  5,840
  6,029
  6,234
  6,456
  6,696
  6,953
  7,227
  7,521
  7,833
  8,165
  8,517
  8,890
  9,286
  9,703
  10,145
  10,611
  11,103
  11,622
  12,168
  12,744
  13,351
  13,990
  14,662
  15,370
  16,114
  16,897
Working capital, $m
  1,033
  -294
  -301
  -309
  -318
  -327
  -338
  -349
  -362
  -375
  -390
  -405
  -422
  -439
  -458
  -477
  -498
  -520
  -544
  -569
  -595
  -622
  -651
  -682
  -714
  -748
  -784
  -822
  -861
  -903
  -947
Total debt, $m
  6,533
  5,299
  5,556
  5,848
  6,177
  6,541
  6,940
  7,375
  7,846
  8,354
  8,898
  9,481
  10,102
  10,764
  11,467
  12,213
  13,004
  13,841
  14,727
  15,662
  16,650
  17,692
  18,791
  19,949
  21,170
  22,455
  23,809
  25,233
  26,733
  28,310
  29,969
Total liabilities, $m
  12,366
  11,132
  11,389
  11,681
  12,010
  12,374
  12,773
  13,208
  13,679
  14,187
  14,731
  15,314
  15,935
  16,597
  17,300
  18,046
  18,837
  19,674
  20,560
  21,495
  22,483
  23,525
  24,624
  25,782
  27,003
  28,288
  29,642
  31,066
  32,566
  34,143
  35,802
Total equity, $m
  -243
  1,237
  1,265
  1,298
  1,334
  1,375
  1,419
  1,468
  1,520
  1,576
  1,637
  1,702
  1,771
  1,844
  1,922
  2,005
  2,093
  2,186
  2,284
  2,388
  2,498
  2,614
  2,736
  2,865
  3,000
  3,143
  3,294
  3,452
  3,618
  3,794
  3,978
Total liabilities and equity, $m
  12,123
  12,369
  12,654
  12,979
  13,344
  13,749
  14,192
  14,676
  15,199
  15,763
  16,368
  17,016
  17,706
  18,441
  19,222
  20,051
  20,930
  21,860
  22,844
  23,883
  24,981
  26,139
  27,360
  28,647
  30,003
  31,431
  32,936
  34,518
  36,184
  37,937
  39,780
Debt-to-equity ratio
  -26.885
  4.280
  4.390
  4.510
  4.630
  4.760
  4.890
  5.030
  5.160
  5.300
  5.440
  5.570
  5.710
  5.840
  5.970
  6.090
  6.210
  6.330
  6.450
  6.560
  6.670
  6.770
  6.870
  6.960
  7.060
  7.140
  7.230
  7.310
  7.390
  7.460
  7.530
Adjusted equity ratio
  -0.145
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,441
  1,805
  1,885
  1,935
  1,990
  2,051
  2,118
  2,191
  2,270
  2,354
  2,445
  2,697
  2,800
  2,911
  3,028
  3,153
  3,285
  3,424
  3,572
  3,728
  3,893
  4,066
  4,249
  4,443
  4,646
  4,860
  5,086
  5,323
  5,573
  5,836
  6,112
Depreciation, amort., depletion, $m
  443
  531
  538
  547
  556
  567
  578
  591
  604
  619
  635
  441
  459
  478
  498
  519
  542
  566
  592
  619
  647
  677
  709
  742
  777
  814
  853
  894
  937
  983
  1,030
Funds from operations, $m
  3,233
  2,336
  2,424
  2,481
  2,546
  2,618
  2,696
  2,782
  2,874
  2,973
  3,080
  3,137
  3,259
  3,388
  3,526
  3,672
  3,827
  3,990
  4,164
  4,346
  4,540
  4,743
  4,958
  5,185
  5,423
  5,674
  5,939
  6,217
  6,510
  6,819
  7,143
Change in working capital, $m
  92
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
Cash from operations, $m
  3,141
  2,342
  2,430
  2,489
  2,555
  2,627
  2,707
  2,793
  2,886
  2,987
  3,094
  3,153
  3,275
  3,406
  3,545
  3,692
  3,848
  4,013
  4,187
  4,371
  4,566
  4,771
  4,987
  5,215
  5,455
  5,708
  5,975
  6,255
  6,550
  6,860
  7,187
Maintenance CAPEX, $m
  0
  -314
  -320
  -328
  -336
  -346
  -356
  -368
  -380
  -394
  -408
  -424
  -441
  -459
  -478
  -498
  -519
  -542
  -566
  -592
  -619
  -647
  -677
  -709
  -742
  -777
  -814
  -853
  -894
  -937
  -983
New CAPEX, $m
  -593
  -107
  -121
  -138
  -155
  -172
  -189
  -205
  -222
  -239
  -257
  -275
  -293
  -312
  -332
  -352
  -373
  -395
  -418
  -441
  -466
  -492
  -519
  -547
  -576
  -607
  -639
  -672
  -708
  -744
  -783
Cash from investing activities, $m
  -499
  -421
  -441
  -466
  -491
  -518
  -545
  -573
  -602
  -633
  -665
  -699
  -734
  -771
  -810
  -850
  -892
  -937
  -984
  -1,033
  -1,085
  -1,139
  -1,196
  -1,256
  -1,318
  -1,384
  -1,453
  -1,525
  -1,602
  -1,681
  -1,766
Free cash flow, $m
  2,642
  1,921
  1,989
  2,023
  2,064
  2,110
  2,162
  2,220
  2,284
  2,354
  2,429
  2,454
  2,541
  2,635
  2,735
  2,842
  2,955
  3,075
  3,203
  3,338
  3,481
  3,632
  3,791
  3,960
  4,137
  4,325
  4,522
  4,730
  4,948
  5,179
  5,421
Issuance/(repayment) of debt, $m
  164
  -1,234
  256
  293
  329
  364
  399
  435
  471
  507
  544
  582
  622
  662
  703
  746
  791
  837
  885
  935
  988
  1,042
  1,099
  1,158
  1,221
  1,286
  1,353
  1,425
  1,499
  1,577
  1,659
Issuance/(repurchase) of shares, $m
  -889
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -725
  -1,234
  256
  293
  329
  364
  399
  435
  471
  507
  544
  582
  622
  662
  703
  746
  791
  837
  885
  935
  988
  1,042
  1,099
  1,158
  1,221
  1,286
  1,353
  1,425
  1,499
  1,577
  1,659
Total cash flow (excl. dividends), $m
  1,853
  688
  2,245
  2,316
  2,392
  2,474
  2,562
  2,655
  2,755
  2,861
  2,974
  3,036
  3,163
  3,297
  3,438
  3,588
  3,746
  3,912
  4,088
  4,273
  4,469
  4,674
  4,890
  5,118
  5,358
  5,610
  5,875
  6,154
  6,448
  6,756
  7,080
Retained Cash Flow (-), $m
  -56
  -1,480
  -28
  -33
  -37
  -40
  -44
  -48
  -52
  -56
  -60
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -98
  -104
  -110
  -116
  -122
  -129
  -136
  -143
  -150
  -158
  -167
  -175
  -184
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -792
  2,217
  2,283
  2,356
  2,434
  2,517
  2,607
  2,703
  2,805
  2,913
  2,972
  3,094
  3,223
  3,360
  3,505
  3,658
  3,819
  3,990
  4,169
  4,359
  4,558
  4,768
  4,990
  5,222
  5,467
  5,725
  5,996
  6,281
  6,581
  6,896
Discount rate, %
 
  7.50
  7.88
  8.27
  8.68
  9.12
  9.57
  10.05
  10.55
  11.08
  11.63
  12.22
  12.83
  13.47
  14.14
  14.85
  15.59
  16.37
  17.19
  18.05
  18.95
  19.90
  20.89
  21.94
  23.04
  24.19
  25.40
  26.67
  28.00
  29.40
  30.87
PV of cash for distribution, $m
 
  -737
  1,905
  1,799
  1,688
  1,573
  1,455
  1,333
  1,211
  1,089
  969
  836
  727
  624
  527
  439
  360
  290
  230
  178
  135
  101
  73
  52
  36
  24
  16
  10
  6
  4
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Colgate-Palmolive Company, together with its subsidiaries, manufactures and sells consumer products worldwide. It operates through two segments, Oral, Personal and Home Care; and Pet Nutrition. The company offers oral care products, including toothpastes, toothbrushes, and mouthwashes, as well as pharmaceutical products for dentists and other oral health professionals; personal care products comprising bar and liquid hand soaps, shower gels, shampoos, conditioners, and deodorants and antiperspirants; and home care products, such as laundry and dishwashing detergents, fabric conditioners, household cleaners, bleaches, and other related products. It also provides pet nutrition products for everyday nutritional needs, a range of therapeutic products to manage disease conditions, and various products with natural ingredients. The company’s principal global and regional trademarks include Colgate, Palmolive, Speed Stick, Lady Speed Stick, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, elmex, Tom’s of Maine, Sanex, Ajax, Axion, Fabuloso, Soupline, and Suavitel, as well as Hill’s Science Diet, Hill’s Prescription Diet, and Hill’s Ideal Balance. It markets and sells its pet nutrition products for dogs and cats through pet supply retailers and veterinarians. Colgate-Palmolive Company was founded in 1806 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Colgate-Palmolive (CL)

Valuation Ratios
P/E Ratio 26
Price to Sales 4.2
Price to Book -261.4
Price to Tangible Book
Price to Cash Flow 20.2
Price to Free Cash Flow 24.9
Growth Rates
Sales Growth Rate -5.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.2%
Cap. Spend. - 3 Yr. Gr. Rate -2.4%
Financial Strength
Quick Ratio 103
Current Ratio 0.1
LT Debt to Equity -2683.1%
Total Debt to Equity -2688.5%
Interest Coverage 24
Management Effectiveness
Return On Assets 21.2%
Ret/ On Assets - 3 Yr. Avg. 16.4%
Return On Total Capital 38.9%
Ret/ On T. Cap. - 3 Yr. Avg. 29.3%
Return On Equity -900.7%
Return On Equity - 3 Yr. Avg. -149.1%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 60.3%
Gross Margin - 3 Yr. Avg. 59.3%
EBITDA Margin 28.6%
EBITDA Margin - 3 Yr. Avg. 24.4%
Operating Margin 25.3%
Oper. Margin - 3 Yr. Avg. 21.1%
Pre-Tax Margin 24.6%
Pre-Tax Margin - 3 Yr. Avg. 20.8%
Net Profit Margin 16.1%
Net Profit Margin - 3 Yr. Avg. 12.4%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. 36.2%
Payout Ratio 61.8%

CL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CL stock intrinsic value calculation we used $15195 million for the last fiscal year's total revenue generated by Colgate-Palmolive. The default revenue input number comes from 2016 income statement of Colgate-Palmolive. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CL stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.5%, whose default value for CL is calculated based on our internal credit rating of Colgate-Palmolive, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Colgate-Palmolive.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CL stock the variable cost ratio is equal to 82.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Colgate-Palmolive.

Corporate tax rate of 27% is the nominal tax rate for Colgate-Palmolive. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CL are equal to 33.9%.

Life of production assets of 16.4 years is the average useful life of capital assets used in Colgate-Palmolive operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CL is equal to -1.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-243 million for Colgate-Palmolive - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 886.877 million for Colgate-Palmolive is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Colgate-Palmolive at the current share price and the inputted number of shares is $63.8 billion.

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Stock chart of CL Financial statements of CL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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