Colgate Palmolive Equity Research Report – Part III

 

I covered Colgate Palmolive’s products category, market share and business performance in Part-I and Part-II.

In this post, I will cover financial performance of the company in detail.

 

Financial Performance of Colgate Palmolive

 

Since Colgate Palmolive is  a pretty big company in size, the base of sales and profit figures is already big one and so average growth of 14% in sales and 19% in profit over the last 8 years is quite decent.

I think FMCG companies give quite decent returns over a period of 10-20 years, if you buy the shares at the right price.

So,for future years, I see the company maintaining the same growth figures.

 

1x1.trans Colgate Palmolive Equity Research Report – Part III

Colgate Palmolive Sales & Profit

(Fig: Sales and Net Profit in Rs.Millions for last 9 years)

Colgate Palmolive has an impressive Gross Profit percentage for last 9 years which is consistently above 50%. This figure suggests profitability of a company’s operations.

 

1x1.trans Colgate Palmolive Equity Research Report – Part III

Colgate Palmolive Gross Profit

(Fig: Gross Profit % for last 9 years)

Having Operating Profit well above 15% consistently for last 9 years is a very good sign for this company. Look at the graph below.

1x1.trans Colgate Palmolive Equity Research Report – Part III

Colgate Palmolive Operating Profit

(Fig: Operating Profit % for last 9 years)

It is a good sign if the operating cash flow of the company is higher than net profit. In Colgate Palmolive’s case it is higher in last 5 years out of 9 years data as shown in the graph below.

1x1.trans Colgate Palmolive Equity Research Report – Part III

Colgate Palmolive Net Profit & Operating Cashflow

(Fig: Net Profit and Operating Cash Flow for last 9 years)

Another important financial ratio for the company—Debt/Equity ratio—is excellent for this company. From 5% Debt in 2004,company has slowly reduced its debt burden and now a Zero-debt company.

The company’s current ratio is well above 1 for last 3 years, though greater than 1.5 is always preferable. Overall, it shows good working capital management.

Colgate Palmolive’s dividend payout ratio is 40%+ for last 4 years. This shows the company has enough cash for its investments. Since the return on equity is well above 100%+ for last 5 years for this company, I won’t mind the company reinvesting the earnings into business.

Colgate Palmolive’s Altman Z-score is 35 and the score is one of the best in Indian companies.  This makes the company a safer bet against any possible bankruptcy.

Colgate Palmolive’s average sales for last 10 year is Rs. 16505 Million and the average capital invested per year is Rs. 2875 Million. So, the capital turnover ratio is around 6, which is very good. This means every 1 rupee invested in business earns Rs.6 worth of sales.

Colgate Palmolive has maintained high and consistent ROE and ROCE above 40% for last 9 years. From 2008 onwards it is above 100%+ providing excellent returns for shareholders. This high ratio indicates management’s capital allocation skills.

1x1.trans Colgate Palmolive Equity Research Report – Part III

Colgate Palmolive ROE & ROC

This was about financial performance of Colgate Palmolive. In the next part of Colgate Palmolive Equity Research Report, we’ll focus on company’s management and competition the company is facing.

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1x1.trans Colgate Palmolive Equity Research Report – Part III

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