Church & Dwight (CHD) is a consumer brand powerhouse in terms of its achievements, although it remains a relatively small player in a field dominated by a few industry giants. The company has been an excellent allocator of capital over the past decade and has rightfully been awarded a premium valuation as the company makes another solid acquisition.
The reality is that quality has been recognised by the market, as the company now trades at 25 times forward earnings, being a steep multiple despite the excellent track record. As the spread versus risk-free rates is very narrow, despite the growth and low risk nature of the business, I am not buying this premium valuation despite the great business. While I congratulate management and investors with this great deal, I am holding off any purchases to levels in the low-forties.
