CLX

Based on a comprehensive review, CLX presents a high-risk, speculative opportunity rather than a stable investment at this time.

Technical Perspective: The stock shows tentative signs of recovery from deeply oversold levels after a severe 40% drawdown. While the recent monthly gain is encouraging, CLX remains in a longer-term downtrend and has significantly underperformed the market, suggesting the recovery is fragile.

Fundamental Concerns: The company's financial health is concerning. Profitability has collapsed with net margins falling to 5.6%, and weak liquidity ratios indicate potential short-term financial strain. Operational efficiency is poor, evidenced by a negative Return on Equity, which casts doubt on management's ability to navigate current challenges effectively.

Valuation and Risk: CLX appears significantly overvalued based on key metrics like its forward P/E of 47.3 and a price-to-book ratio near 95, which are hard to justify given its deteriorating fundamentals. The extreme maximum drawdown of -40% highlights substantial stock-specific risk, overshadowing its typically low volatility.

Recommendation: We recommend a Hold rating for existing investors, as selling at depressed levels may realize losses. However, for new investors, we advise against buying at this time. The combination of stretched valuation, serious fundamental deterioration, and high stock-specific risk suggests the potential for further downside. Investors should wait for clearer signs of a sustained operational turnaround and margin recovery before considering a position.

RockFlow Model Forecast: Three Scenarios for 2026

Based on a comprehensive review, the 12-month outlook for CLX (The Clorox Company) remains challenging. Key catalysts for a potential recovery hinge entirely on a successful operational turnaround, specifically demonstrating sustained margin improvement and a return to profitability after recent setbacks. The primary risks are substantial, including the persistence of fundamental deterioration, its significantly stretched valuation metrics that are difficult to justify, and high stock-specific volatility. Given the lack of a clear positive catalyst and the dominance of these risks, the price is expected to remain under pressure with a high potential for further downside, likely trading in a wide range between $90 and $115 as the market awaits concrete evidence of a rebound.

Wall Street Consensus

Most Wall Street analysts are optimistic about CLX's 12-month outlook, with consensus target around $111.41, indicating expected upside potential.

Overall, CLX has investment potential but also faces challenges. Here are key factors to weigh before investing.

CLX has demonstrated mixed performance with recent strength but significant longer-term weakness relative to its historical range. The stock's recent bounce from 52-week lows contrasts sharply with its substantial 3-month decline and major drawdown over the past year. Overall, CLX remains in a challenging position despite showing some near-term recovery momentum.

Short-term performance shows a notable divergence, with CLX gaining nearly 6% over the past month while still down over 9% for the quarter. The stock has significantly underperformed the broader market by more than 12 percentage points over the three-month period, though its low beta of 0.575 indicates it typically exhibits less volatility than the overall market.

Currently trading just 12.6% above its 52-week low and 33.7% below its 52-week high, CLX appears to be recovering from oversold conditions following its 40% maximum drawdown. Despite the recent monthly gain, the stock remains closer to the lower end of its annual range, suggesting it may still offer recovery potential after its substantial decline.

Revenue & Profitability CLX's profitability has weakened significantly, with Q1 2026 showing a net profit margin of just 5.6% compared to 16.7% in the previous quarter. The gross margin compression from 46.3% to 41.6% indicates substantial cost pressures, while operating income margin dropped sharply from 21.2% to 8.6%. This suggests the company is facing material margin erosion amid challenging operating conditions.

Financial Health The company maintains a debt ratio of 56%, but concerning liquidity metrics include a current ratio of 0.76 and quick ratio of 0.50, indicating potential short-term liquidity constraints. The negative cash conversion cycle of -101 days is favorable as suppliers effectively finance operations, though the interest coverage of 4.7x provides modest but adequate debt service capacity.

Operational Efficiency CLX shows weak operational performance with a deeply negative ROE of -3.64% and low asset turnover of 0.26, reflecting inefficient utilization of both equity and assets. The inventory turnover of 1.45 and receivables turnover of 2.03 suggest suboptimal working capital management, contributing to the poor overall efficiency metrics observed in the quarter.

Valuation Level: Based on the provided metrics, CLX appears significantly overvalued on several fronts. The elevated forward PE ratio of 47.3 and exceptionally high PB (94.56) and EV/EBITDA (95.41) ratios indicate the market is pricing the stock with substantial growth expectations, which are not corroborated by the negative PEG ratio of -0.62. While the TTM PE and PS ratios appear more reasonable, the extreme values of other key metrics suggest the stock is trading at premium levels disconnected from its current earnings power and asset base.

Peer Comparison: A direct peer comparison cannot be performed as industry average data is unavailable. The lack of benchmark data severely limits contextual analysis, making it impossible to determine whether these valuation metrics represent a premium or discount relative to the broader industry. Investors should seek comparative industry data to properly assess CLX's relative valuation position before making investment decisions.

Based on its beta of 0.575, CLX exhibits low volatility risk relative to the broader market; however, this defensive characteristic is contradicted by a significant one-year maximum drawdown of -40.05%, indicating the stock has experienced substantial price depreciation from a recent peak. This disconnect suggests that while CLX may be less volatile during normal market conditions, it remains susceptible to severe, stock-specific downside events.

The notable absence of reported short interest implies that professional investors do not currently hold a significant bearish outlook on the stock, potentially reducing the risk of a short squeeze. However, the extreme drawdown points to other underlying risks, such as fundamental business challenges or adverse sector-specific developments, which merit closer scrutiny despite the lack of speculative selling pressure.