Colgate-Palmolive Co. (NYSE:CL)

An analysis of the financial data from 2006 to 2023 reveals a long-term expansion in the valuation multiple relative to operating performance. While both share price and operating profit per share trended upward for much of the period, the growth in share price has outpaced the growth in operational profitability, leading to a higher Price to operating profit (P/OP) ratio in the latter years.

Share Price Movement

The share price demonstrated a strong overall increase, rising from 27.31 USD in 2006 to a peak of 79.15 USD in 2022. A significant contraction occurred in 2009, where the price dropped to 30.09 USD, followed by a steady recovery and sustained growth through 2022, before ending the period at 72.77 USD in 2023.

Operating Profit per Share Performance

Operating profit per share grew steadily from 2.15 USD in 2006, reaching a peak of 4.58 USD in 2021. However, this growth was not linear; a notable dip occurred in 2016 (3.12 USD) and a more pronounced decline is observed toward the end of the sequence, falling to 3.48 USD by 2023.

P/OP Ratio Trends

The P/OP ratio exhibited significant volatility, ranging from a low of 9.99 in 2009 to a high of 21.52 in 2016. Between 2006 and 2011, the ratio remained relatively suppressed, frequently staying between 10 and 13. From 2012 onward, a structural shift toward higher multiples is evident, with the ratio consistently remaining above 15, except for a brief period around 2012.

Valuation Insights

The increase in the P/OP ratio to 20.89 by 2023, compared to 12.71 in 2006, indicates that the market is attributing a higher premium to each dollar of operating profit. The spike in 2016 and the high ratio in 2023 are specifically driven by periods where the share price remained resilient or grew while the operating profit per share declined, resulting in multiple expansion.