- Church and Dwight has multiple “green flags” that suggests a strong company
- Church and Dwight provides goods that are necessary within the household
- Church and Dwight has increased over 2600% over the past twenty years.
In the words of Yahoo Finance, CHD “develops, manufactures, and markets household, personal care, and specialty products in the United States.”
Church & Dwight Co is an interesting company to analyze for a few reasons:
- Church & Dwight hold a number of high profile brands in their portfolio
- Even though they are a large company, they have still grown their sales and net income over the past three years.
- Church & Dwight pays a dividend with a yield of 1.6%
Almost every article I read nowadays about the market is about how the bull market is dead, and how investors are scared. Since I, nor anyone else, can be certain that the bull market is over; I believe that it is always better to be safe than sorry. Therefore, a lot of the companies I will be analyzing will be necessities within the household, rather than “the next big thing.” Church & Dwight fits this profile perfectly. Church and Dwight produces a multitude of household name products such as Arm & Hammer, Trojan, OxiClean, Orajel, etc. All of these products have extremely strong brands behind them, and won’t be going anywhere anytime in the near future, even if we end up falling into another recession – which I don’t believe is likely.
So, now to the Quantitative analysis.
CHD’s chart over the past twenty years with flags plotted.
Now, this chart is overwhelming at first glance. Let’s take each of these flags individually and dissect Church & Dwight’s fundamentals.
Green Flags –
–Piotroski Score – The Piotroski score was created by Professor Joseph Piotroski at the University of Chicago. It is a score out of 9 that looks for value within a company based on fundamental data. This formula has been adapted to the Equities Lab screening system, and can be applied to any security in the market. CHD kept a fairly consist 8 out of 9 up until late 2012. At that time it began to fluctuate a bit, eventually landing at its current value of 6. This, though not a fantastic piotroski score, still suggests there is value to be found in CHD.
–Analysis Score – This score is a Green Flag that is proprietary to the Equities Lab platform. It barely beats the market, over a 20 year period; however, it does check for seven different fundamental data points that look for increasing value in the company over the past two years. CHD scores a six out of seven on that scale.
–Odds of Decreasing – This is one of my favorite fields to look at when it comes to looking at a possible investment. This field, based on FRED data that can be found on Quandl.com, analyzes the probability that a stock will drop based on the EMA over the past 200 days. Any moving average over 30 suggests trouble on the horizon. Currently, CHD, has a Moving Average of 5.379, suggesting it has a low probability of dropping.
–Shares Outstanding – Most companies release more shares the longer they are public. This is just something that happens, especially if that company is growing in value. CHD followed this pattern, releasing shares on a fairly consistent basis until October of 2011. At this point they reached their maximum shares outstanding of 143.71m and began to buy back shares, even though their stock price was still appreciating in value. Currently, CHD has roughly 140m shares outstanding.
–Baneish M Score – The Baneish M Score is a way to calculate the probability that a company is “cooking their books.” Basically, if a company scores below a -2.22 they are most likely not cooking their books. However, if they score above that, the higher they score, the more likely it is that they are cooking their books. In the case of CHD, they score a -2.95, meaning they are most likely not cooking their books.
–Sales Per Employee – Since 2005 CHD, has consistently increased their sales per employee based on 1Q sales numbers. Starting with sales at 106,573 Units sold per employee to 201,690 units sold per employee.
–Dupont Analysis – The Dupont Analysis checks the ROE of an investment, and it breaks it down into three different parts. After the analysis CHD has a ROE of .1969, or 19.69% ROE.
Overall, CHD, Church & Dwight Co, has extremely strong fundamental data. This data has been analyzed over the past twenty years, and CHD has consistently posted this caliber of results over the past twenty years. This strong data matched with their product lines that can be deemed necessities in the household, makes them a great way to maintain value in your portfolio while the rest of the market runs back and forth attempting to find ground.