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Church & Dwight Stock Trading at a Premium: Time to Hold or Fold?
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Church & Dwight Co., Inc. (CHD - Free Report) is currently trading at a forward 12-month price-to-earnings multiple of 28.23x, which positions it at a premium compared with the industry’s average of 20x. The valuation indicates that Church & Dwight is overvalued.
CHD Stock P/E Performance
Image Source: Zacks Investment Research
While CHD’s strong fundamentals have established the stock as a reliable long-term investment, its premium pricing reflects heightened investor expectations. Shares of Church & Dwight have risen 1.6% in the past three months compared with the industry’s growth of 5%. The S&P 500 has declined 3.7% in the same period.
Such a premium valuation often signals high investor expectations for growth. While this may concern some value-focused investors, it is essential to consider whether the fundamentals justify the price.
Key Drivers of CHD’s Business Strategy
Church & Dwight’s strong brand equity provides significant pricing power, enabling it to pass on cost increases to consumers with minimal impact on demand, thereby supporting profitability, as evidenced by the robust performance in the fourth quarter of 2024.
E-commerce remains a crucial driver for CHD, with online sales accounting for 21.4% of total revenues in the fourth quarter of 2024. CHD ranks in the top quartile of consumer packaged goods companies in terms of digital growth, benefiting from a well-executed online strategy. By expanding direct-to-consumer platforms and optimizing omnichannel presence, CHD is well-positioned to capitalize on the accelerating shift toward online shopping.
Church & Dwight also boasts a history of successful acquisitions, including HERO and THERABREATH, both of which have become major growth catalysts. Management has reiterated its strategy of acquiring No. 1 or No. 2 brands with high margins and strong long-term prospects, reinforcing growth trajectory.
The company has ramped up its innovation efforts, ensuring new product launches contribute to growth rather than cannibalizing existing sales. With more than 50% of its innovation pipeline now focused on emerging categories, the company is diversifying beyond its traditional product lines, unlocking new revenue streams and reinforcing competitive edge.
CHD Stock Past Three Month Performance
Image Source: Zacks Investment Research
Are Headwinds Enough to Derail CHD’s Momentum?
Despite its strategic initiatives, Church & Dwight faces challenges stemming from shifting consumer spending patterns. On its last earnings call, management explicitly stated that price increases are not currently an option, even in the face of further commodity inflation. This is due to consumer exhaustion, forcing the company to absorb cost pressures instead of passing them on. As a result, CHD’s ability to protect margins could be constrained if inflation persists.
Church & Dwight has been contending with rising marketing expenses, aimed at boosting brand awareness and supporting new products and acquisitions. In 2024, marketing expenses as a percentage of sales increased 50 basis points. Looking ahead, the company expects marketing spending to exceed 11% of sales in 2025, which could pressure near-term profitability.
What is the Right Investment Strategy for CHD?
Church & Dwight presents a compelling long-term growth story, supported by strong brand equity, strategic acquisitions and a growing e-commerce presence. The company’s ability to drive organic sales growth and expand into higher-margin categories underscores its resilience in the consumer goods sector. However, rising marketing expenses and the inability to implement further price increases in the near term could pressure margins. Investors will need to keep an eye on how the company navigates these issues in the coming quarters. Church & Dwight currently carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Nu Skin Enterprises’ current financial-year earnings indicates growth of 17.9% from prior-year reported levels. NUS delivered a trailing four-quarter earnings surprise of 38.6%, on average.
BRF S.A. (BRFS - Free Report) raises, produces and slaughters poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It currently carries a Zacks Rank of 2 (Buy). BRFS delivered a trailing four-quarter earnings surprise of 9.6%, on average.
The Zacks Consensus Estimate for BRF S.A.'s current fiscal-year sales and earnings indicates growth of 0.3% and 22.2%, respectively, from the prior-year levels.
United Natural Foods, Inc. (UNFI - Free Report) distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. It currently carries a Zacks Rank of 2. UNFI delivered a trailing four-quarter earnings surprise of 408.7%, on average.
The consensus estimate for United Natural Foods’ current financial-year sales and earnings implies growth of 1.9% and 485.7%, respectively, from the year-ago figures.
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Church & Dwight Stock Trading at a Premium: Time to Hold or Fold?
Church & Dwight Co., Inc. (CHD - Free Report) is currently trading at a forward 12-month price-to-earnings multiple of 28.23x, which positions it at a premium compared with the industry’s average of 20x. The valuation indicates that Church & Dwight is overvalued.
CHD Stock P/E Performance
Image Source: Zacks Investment Research
While CHD’s strong fundamentals have established the stock as a reliable long-term investment, its premium pricing reflects heightened investor expectations. Shares of Church & Dwight have risen 1.6% in the past three months compared with the industry’s growth of 5%. The S&P 500 has declined 3.7% in the same period.
Such a premium valuation often signals high investor expectations for growth. While this may concern some value-focused investors, it is essential to consider whether the fundamentals justify the price.
Key Drivers of CHD’s Business Strategy
Church & Dwight’s strong brand equity provides significant pricing power, enabling it to pass on cost increases to consumers with minimal impact on demand, thereby supporting profitability, as evidenced by the robust performance in the fourth quarter of 2024.
E-commerce remains a crucial driver for CHD, with online sales accounting for 21.4% of total revenues in the fourth quarter of 2024. CHD ranks in the top quartile of consumer packaged goods companies in terms of digital growth, benefiting from a well-executed online strategy. By expanding direct-to-consumer platforms and optimizing omnichannel presence, CHD is well-positioned to capitalize on the accelerating shift toward online shopping.
Church & Dwight also boasts a history of successful acquisitions, including HERO and THERABREATH, both of which have become major growth catalysts. Management has reiterated its strategy of acquiring No. 1 or No. 2 brands with high margins and strong long-term prospects, reinforcing growth trajectory.
The company has ramped up its innovation efforts, ensuring new product launches contribute to growth rather than cannibalizing existing sales. With more than 50% of its innovation pipeline now focused on emerging categories, the company is diversifying beyond its traditional product lines, unlocking new revenue streams and reinforcing competitive edge.
CHD Stock Past Three Month Performance
Image Source: Zacks Investment Research
Are Headwinds Enough to Derail CHD’s Momentum?
Despite its strategic initiatives, Church & Dwight faces challenges stemming from shifting consumer spending patterns. On its last earnings call, management explicitly stated that price increases are not currently an option, even in the face of further commodity inflation. This is due to consumer exhaustion, forcing the company to absorb cost pressures instead of passing them on. As a result, CHD’s ability to protect margins could be constrained if inflation persists.
Church & Dwight has been contending with rising marketing expenses, aimed at boosting brand awareness and supporting new products and acquisitions. In 2024, marketing expenses as a percentage of sales increased 50 basis points. Looking ahead, the company expects marketing spending to exceed 11% of sales in 2025, which could pressure near-term profitability.
What is the Right Investment Strategy for CHD?
Church & Dwight presents a compelling long-term growth story, supported by strong brand equity, strategic acquisitions and a growing e-commerce presence. The company’s ability to drive organic sales growth and expand into higher-margin categories underscores its resilience in the consumer goods sector. However, rising marketing expenses and the inability to implement further price increases in the near term could pressure margins. Investors will need to keep an eye on how the company navigates these issues in the coming quarters. Church & Dwight currently carries a Zacks Rank #3 (Hold).
Look Beyond the CHD Stock
Nu Skin Enterprises, Inc. (NUS - Free Report) engages in the development and distribution of various beauty and wellness products worldwide. NUS currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nu Skin Enterprises’ current financial-year earnings indicates growth of 17.9% from prior-year reported levels. NUS delivered a trailing four-quarter earnings surprise of 38.6%, on average.
BRF S.A. (BRFS - Free Report) raises, produces and slaughters poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It currently carries a Zacks Rank of 2 (Buy). BRFS delivered a trailing four-quarter earnings surprise of 9.6%, on average.
The Zacks Consensus Estimate for BRF S.A.'s current fiscal-year sales and earnings indicates growth of 0.3% and 22.2%, respectively, from the prior-year levels.
United Natural Foods, Inc. (UNFI - Free Report) distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. It currently carries a Zacks Rank of 2. UNFI delivered a trailing four-quarter earnings surprise of 408.7%, on average.
The consensus estimate for United Natural Foods’ current financial-year sales and earnings implies growth of 1.9% and 485.7%, respectively, from the year-ago figures.