Stock Analysis on Net
Stock Analysis on Net

Colgate-Palmolive Co. (NYSE:CL)

This company has been moved to the archive! The financial data has not been updated since July 28, 2023.

Present Value of Free Cash Flow to Equity (FCFE) 

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Colgate-Palmolive Co., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 9.95%
01 FCFE0 3,507
1 FCFE1 13,161 = 3,507 × (1 + 275.29%) 11,970
2 FCFE2 40,471 = 13,161 × (1 + 207.50%) 33,476
3 FCFE3 97,008 = 40,471 × (1 + 139.70%) 72,980
4 FCFE4 166,763 = 97,008 × (1 + 71.91%) 114,102
5 FCFE5 173,619 = 166,763 × (1 + 4.11%) 108,041
5 Terminal value (TV5) 3,094,869 = 173,619 × (1 + 4.11%) ÷ (9.95% – 4.11%) 1,925,890
Intrinsic value of Colgate-Palmolive Co. common stock 2,266,458
 
Intrinsic value of Colgate-Palmolive Co. common stock (per share) $2,741.60
Current share price $75.62

Based on: 10-K (reporting date: 2022-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.76%
Expected rate of return on market portfolio2 E(RM) 14.73%
Systematic risk of Colgate-Palmolive Co. common stock βCL 0.52
 
Required rate of return on Colgate-Palmolive Co. common stock3 rCL 9.95%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rCL = RF + βCL [E(RM) – RF]
= 4.76% + 0.52 [14.73% – 4.76%]
= 9.95%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Colgate-Palmolive Co., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in millions)
Dividends 1,562 1,515 1,502 1,472 1,448
Net income attributable to Colgate-Palmolive Company 1,785 2,166 2,695 2,367 2,400
Net sales 17,967 17,421 16,471 15,693 15,544
Total assets 15,731 15,040 15,920 15,034 12,161
Total Colgate-Palmolive Company shareholders’ equity 401 609 743 117 (102)
Financial Ratios
Retention rate1 0.12 0.30 0.44 0.38 0.40
Profit margin2 9.93% 12.43% 16.36% 15.08% 15.44%
Asset turnover3 1.14 1.16 1.03 1.04 1.28
Financial leverage4 39.23 24.70 21.43 128.50 —
Averages
Retention rate 0.33
Profit margin 13.85%
Asset turnover 1.13
Financial leverage 53.46
 
FCFE growth rate (g)5 275.29%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

1 Retention rate = (Net income attributable to Colgate-Palmolive Company – Dividends) ÷ Net income attributable to Colgate-Palmolive Company
= (1,785 – 1,562) ÷ 1,785
= 0.12

2 Profit margin = 100 × Net income attributable to Colgate-Palmolive Company ÷ Net sales
= 100 × 1,785 ÷ 17,967
= 9.93%

3 Asset turnover = Net sales ÷ Total assets
= 17,967 ÷ 15,731
= 1.14

4 Financial leverage = Total assets ÷ Total Colgate-Palmolive Company shareholders’ equity
= 15,731 ÷ 401
= 39.23

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.33 × 13.85% × 1.13 × 53.46
= 275.29%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (62,514 × 9.95% – 3,507) ÷ (62,514 + 3,507)
= 4.11%

where:
Equity market value0 = current market value of Colgate-Palmolive Co. common stock (US$ in millions)
FCFE0 = the last year Colgate-Palmolive Co. free cash flow to equity (US$ in millions)
r = required rate of return on Colgate-Palmolive Co. common stock

FCFE growth rate (g) forecast

Colgate-Palmolive Co., H-model

Microsoft Excel
Year Value gt
1 g1 275.29%
2 g2 207.50%
3 g3 139.70%
4 g4 71.91%
5 and thereafter g5 4.11%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 275.29% + (4.11% – 275.29%) × (2 – 1) ÷ (5 – 1)
= 207.50%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 275.29% + (4.11% – 275.29%) × (3 – 1) ÷ (5 – 1)
= 139.70%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 275.29% + (4.11% – 275.29%) × (4 – 1) ÷ (5 – 1)
= 71.91%