Investment Thesis
Clorox exhibits deteriorating fundamentals with near-zero revenue growth (+0.2%) and declining net income (-1.7% YoY), masked by artificial EPS growth from share buybacks. Critical balance sheet stress with negative stockholders' equity (-$67M) and poor liquidity ratios (0.84x current, 0.65x quick) creates meaningful refinancing and operational risk despite modest positive free cash flow.
Strengths
- Solid gross margins of 42.7% demonstrate pricing power in core cleaning products
- Positive operating cash flow ($282M) and free cash flow ($161M) remain adequate for debt service
- Reasonable interest coverage ratio of 7.7x indicates near-term ability to service debt obligations
Risks
- Negative stockholders' equity of -$67M indicates technical insolvency; company liabilities exceed assets
- Current ratio of 0.84x and quick ratio of 0.65x signal tight liquidity and potential working capital stress
- Stagnant revenue growth (+0.2% YoY) combined with declining net income (-1.7% YoY) reflects compressed profitability and operational headwinds
- High leverage ($2.5B long-term debt) relative to shrinking equity base creates vulnerability to economic stress
- EPS growth (+189.8%) driven entirely by share buybacks rather than organic earnings expansion
Key Metrics to Watch
- Quarterly revenue growth rate and trend reversal indicators
- Operating cash flow sustainability and free cash flow conversion
- Debt-to-assets ratio and equity trajectory for signs of balance sheet deterioration or stabilization
- Current and quick ratios for evidence of liquidity pressure or improvement
- Operating margin expansion capacity given profitability headwinds
Financial Metrics
Revenue
4.8B
Net Income
424.0M
EPS (Diluted)
$3.47
Free Cash Flow
161.0M
Total Assets
6.4B
Cash
1.2B
Profitability Ratios
Gross Margin
42.7%
Operating Margin
12.1%
Net Margin
8.9%
ROE
N/A
ROA
6.6%
FCF Margin
3.4%
Balance Sheet & Liquidity
Current Ratio
0.84x
Quick Ratio
0.65x
Debt/Equity
N/A
Debt/Assets
98.6%
Interest Coverage
7.71x
Long-term Debt
2.5B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T17:15:56.773068 |
Data as of: 2026-03-31 |
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