Should You Invest in Colgate-Palmolive?

PHOTO CREDIT: Colgate-Palmolive

OVERVIEW

Colgate-Palmolive Company designs, manufactures, and distributes consumer products around the world. They operate through the Colgate and Palmolive brands, which makes oral care products, soap, and other personal care and household products like soap and cleaning products. They also make pet nutrition products like Hill’s Science Diet and other products under the Hill’s brand.

Why You Should?

  1. Colgate-Palmolive is a recession-proof investment due to the essential nature of the products that they sell. Oral care, personal care, household products like soap and detergents, as well as pet food are essential to maintain a high quality of life regardless of the economic times. This makes Colgate-Palmolive a safe investment.
  2. The COVID-19 Pandemic has benefited the company’s sales. At the start, people were stockpiling essential goods like the ones that Colgate-Palmolive offer. After this initial phase of stock-piling, people prioritized the purchase of these essential products over others during tough economic times. All of these factors benefited the company’s quarterly sales.
  3. Colgate-Palmolive sells its wide range of essential products in over 200 countries and markets around the world. This means that the company will always have some type of demand across its markets and will help it stay afloat during times of low sales and future product launches and other growth. This will benefit the company’s sales.
  4. Colgate-Palmolive has seen rising revenues and profits over the past couple of financial years. This growth has slowed due to increased innovation and tougher market conditions. However, this revenue and profit growth has helped the company build a stronger balance sheet which will benefit its future growth plans and help it go through tough economic times. In the financial year of 2019, the company reported revenues of 15.7 billion and profits of around 2.37 billion. In the financial year of 2018, the company reported revenues of around 15.5 billion and profits of around 2.4 billion.
PHOTO CREDIT: Yahoo Finance

Why You Should Not?

  1. Colgate-Palmolive faces tough competition in extremely price-sensitive industries. Other manufacturers like Procter and Gamble offer directly-competing products to the ones that Colgate-Palmolive offer. Other store brands like Costco’s Kirkland Signature also offer products that compete with the ones that Colgate-Palmolive offers.
  2. Colgate-Palmolive operates in an extremely price-sensitive industry and therefore has low margins on all of its products. It needs to keep operating costs low and uncertainty in prices might negatively impact the company. However, Colgate-Palmolive has been consistently delivering for investors since it became public.
  3. The COVID-19 Pandemic has hurt the company’s commercial sales due to the closure of several events due to government regulation. For example, restaurants will need less soap to clean. The company has also seen higher operating costs to keep workers safe during these times. Some people might also opt to buy cheaper household products for the time being due to economic uncertainty. These factors have hurt the company’s results.

MY OPINION

In my opinion, I think that Colgate-Palmolive is a great long term investment due to the resiliency of its business regardless of the economic times. Its wide range of products which it sells in 200 countries has benefited the company through this pandemic. However, lower sales of some products due to the pandemic as well as low margins due to competition might hurt the company in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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