Clorox bleach kills 99.9% of germs, and right now, it’s also beating 99% of stocks. While it probably doesn’t hurt to load up on disinfectants amid the outbreak of a potentially deadly virus, using the same logic to buy shares of the company may not be so prudent.
Clorox generates a third of its revenue from cleaning products for household and professional use, and 85 per cent of its sales occur in the U.S. It’s hardly a fast-growing business, nor is it typical to see large fluctuations in demand, except for in the September quarter at the start of the regular flu season. Sales of Clorox’s cleaning products have held steady at US$460 million to US$570 million every quarter for the last four years, averaging US$508 million over that span.
The market clearly sees Clorox as a hot commodity. The only problem is that Clorox’s stock is already quite expensive, and it’s not like the sales boost from the coronavirus will be permanent. Six analysts kept their “sell” ratings on the stock after Clorox’s latest earnings report earlier this month, which showed that two of the company’s other product lines — bags and charcoal —continued to prove troublesome. Clorox had mistakenly raised the prices of its Glad trash bags last year to offset resin costs, but its competitors didn’t follow suit and so it lost market share and had to turn to promotions.