Clorox (CLX)

Consumer products giant Clorox (NYSE:CLX) announced better-than-expected revenue in Q4 CY2025, but sales were flat year on year at $1.67 billion. Its non-GAAP profit of $1.39 per share was 3% below analysts’ consensus estimates.

Company Overview

Founded in 1913 with bleach as the sole product offering, Clorox (NYSE:CLX) today is a consumer products giant whose product portfolio spans everything from bleach to skincare to salad dressing to kitty litter.

Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.

Competitors that offer a wide range of household and personal care products include Proctor & Gamble (NYSE:PG), Unilever (LSE:ULVR), Reckitt Benckiser (LSE:RKT), and Colgate-Palmolive (NYSE:CL).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.

With $6.76 billion in revenue over the past 12 months, Clorox is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth. To accelerate sales, Clorox likely needs to optimize its pricing or lean into new products and international expansion.

As you can see below, Clorox’s demand was weak over the last three years. Its sales fell by 1.5% annually, a rough starting point for our analysis.

This quarter, Clorox’s $1.67 billion of revenue was flat year on year but beat Wall Street’s estimates by 1.9%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection suggests its newer products will spur better top-line performance, it is still below average for the sector.

When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.

The demand for Clorox’s products has been stable over the last eight quarters but fell behind the broader sector. On average, the company has posted feeble year-on-year organic revenue growth of 1.9%.

In the latest quarter, Clorox’s organic sales fell by 1% year on year. This decline was a reversal from its historical levels. We’ll keep a close eye on the company to see if this turns into a longer-term trend.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products, has a stronger brand, and commands pricing power.

Clorox has great unit economics for a consumer staples company, giving it ample room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an excellent 44.3% gross margin over the last two years. That means Clorox only paid its suppliers $55.66 for every $100 in revenue.

Clorox’s gross profit margin came in at 43.2% this quarter, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is an important measure of profitability accounting for key expenses such as marketing and advertising, IT systems, wages, and other administrative costs.

Clorox’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 14.6% over the last two years. This profitability was top-notch for a consumer staples business, showing it’s an well-run company with an efficient cost structure. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Clorox’s operating margin might fluctuated slightly but has generally stayed the same over the last year, highlighting the consistency of its expense base.

This quarter, Clorox generated an operating margin profit margin of 12.9%, down 1 percentage points year on year. Since Clorox’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Clorox’s EPS grew at a remarkable 16.5% compounded annual growth rate over the last three years, higher than its 1.5% annualized revenue declines. This tells us management adapted its cost structure in response to a challenging demand environment.

In Q4, Clorox reported adjusted EPS of $1.39, down from $1.55 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Clorox’s full-year EPS of $6.56 to stay about the same.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Clorox has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 9.8% over the last two years, quite impressive for a consumer staples business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Clorox hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 22.3%, impressive for a consumer staples business.

It was encouraging to see Clorox beat analysts’ organic revenue expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its EPS missed and its gross margin fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. Investors were likely hoping for more, and shares traded down 3.4% to $111.07 immediately following the results.

Updated: February 3, 2026 at 4:20 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Clorox, you should also grasp the company’s longer-term business quality and valuation.

Clorox isn’t a terrible business, but it doesn’t pass our quality test. First off, its revenue has declined over the last three years. And while Clorox’s market-beating ROIC suggests it has been a well-managed company historically, its projected EPS for the next year is lacking.

Clorox’s P/E ratio based on the next 12 months is 17.5x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $120.41 on the company (compared to the current share price of $111.07).