Value
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.8 |
| P/S | 9.1 |
| EV/EBITDA | 4.7 |
| Fwd P/E | 7.8 |
| PEG | 4.3 |
| Analyst target | 4.0 |
- ▸Forward P/E: 15.6x
- ▸PEG: 2.19
CLX · Why this verdict
Why Clorox Company (The) (CLX) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.9/10
ConfidenceHIGH
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Free cash flow represents only 8% of net income — a red-flag level of conversion that indicates reported earnings are not translating meaningfully into cash available for dividends or reinvestment, raising questions about the durability of shareholder returns. Quality breakdown | Free cash flow as a percentage of net income rises above 50% for two consecutive quarters, demonstrating that the gap between accounting earnings and cash generation is closing. | →Stable |
| CounterA temporary gap between earnings and cash flow can reflect timing differences in working capital or one-time capital deployment rather than a structural problem; if the gap closes naturally the concern resolves without any change to the underlying business model. | ||
The stock trades below its 200-day moving average with that average sloping down 3.6% over the past 30 days, a death cross confirmed, and on-balance volume in distribution — a technical posture that historically requires a sustained repair phase before a durable advance becomes possible. Momentum breakdown | The 50-day moving average crosses back above the 200-day moving average and the stock holds above both for 30 consecutive trading days, signaling a trend reversal. | →Stable |
| CounterConsumer staples stocks with reasonable quality profiles can form bottoms quickly when sentiment turns defensive; in a risk-off environment relative safety may attract buyers who compress the technical repair timeline significantly. | ||
With the stock just 2.9% below the near-term price ceiling and the risk/reward ratio at 0.47-to-1, the setup offers less than 50 cents of potential gain for every dollar at risk — a geometry that leaves almost no margin for error at current prices. Price targets | Analyst consensus price targets rise to above $110, restoring meaningful upside headroom and rebuilding a more compelling risk/reward ratio. | →Stable |
| CounterConsumer staples companies at or near targets can re-rate if analysts revise estimates upward on stronger-than-expected pricing power or volume recovery; the target ceiling is not permanent if earnings momentum improves. | ||
Three of the last four quarters produced positive earnings surprises — including a 29.8% beat at the oldest quarter and a 6.2% beat most recently — giving the company a credible delivery record despite one intervening miss, and the bull case explicitly highlights this beat pattern as a key positive. Bull case | The company beats consensus estimates in three of the next four quarters with an average positive surprise above 5%, extending the track record across another full-year cycle. | →Stable |
| CounterThe miss in the most recent February quarter (-3.0% surprise) shows the streak is not guaranteed; geographically concentrated supplier dependence could introduce input cost volatility that makes consistent delivery harder in subsequent periods. | ||
Free cash flow represents only 8% of net income — a red-flag level of conversion that indicates reported earnings are not translating meaningfully into cash available for dividends or reinvestment, raising questions about the durability of shareholder returns.
→StableQuality breakdown
- Expectation
- Free cash flow as a percentage of net income rises above 50% for two consecutive quarters, demonstrating that the gap between accounting earnings and cash generation is closing.
CounterA temporary gap between earnings and cash flow can reflect timing differences in working capital or one-time capital deployment rather than a structural problem; if the gap closes naturally the concern resolves without any change to the underlying business model.
The stock trades below its 200-day moving average with that average sloping down 3.6% over the past 30 days, a death cross confirmed, and on-balance volume in distribution — a technical posture that historically requires a sustained repair phase before a durable advance becomes possible.
→StableMomentum breakdown
- Expectation
- The 50-day moving average crosses back above the 200-day moving average and the stock holds above both for 30 consecutive trading days, signaling a trend reversal.
CounterConsumer staples stocks with reasonable quality profiles can form bottoms quickly when sentiment turns defensive; in a risk-off environment relative safety may attract buyers who compress the technical repair timeline significantly.
With the stock just 2.9% below the near-term price ceiling and the risk/reward ratio at 0.47-to-1, the setup offers less than 50 cents of potential gain for every dollar at risk — a geometry that leaves almost no margin for error at current prices.
→StablePrice targets
- Expectation
- Analyst consensus price targets rise to above $110, restoring meaningful upside headroom and rebuilding a more compelling risk/reward ratio.
CounterConsumer staples companies at or near targets can re-rate if analysts revise estimates upward on stronger-than-expected pricing power or volume recovery; the target ceiling is not permanent if earnings momentum improves.
Three of the last four quarters produced positive earnings surprises — including a 29.8% beat at the oldest quarter and a 6.2% beat most recently — giving the company a credible delivery record despite one intervening miss, and the bull case explicitly highlights this beat pattern as a key positive.
→StableBull case
- Expectation
- The company beats consensus estimates in three of the next four quarters with an average positive surprise above 5%, extending the track record across another full-year cycle.
CounterThe miss in the most recent February quarter (-3.0% surprise) shows the streak is not guaranteed; geographically concentrated supplier dependence could introduce input cost volatility that makes consistent delivery harder in subsequent periods.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Clorox has a credible earnings beat track record and solid peer-relative standing, but the stock has run into a natural ceiling with less than 3% of room remaining to the consensus target, free cash flow conversion is critically weak at 8% of net income, and a confirmed downtrend with a death cross in place argues for patience rather than new exposure.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROA | 7.4 |
| Gross margin | 4.8 |
| Op margin | 6.8 |
| Net margin | 5.6 |
| Current ratio | 3.4 |
| FCF quality | 0.7 |
| Moat | 5.6 |
| Piotroski F | 6.7 |
- ▸Earnings quality RED FLAG: 8% FCF/NI
Growth
2.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.5 |
| EPS growth | 2.5 |
Momentum
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 1.4 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -3.2%/30d — confirmed downtrend
Sentiment
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 6.2 |
| erm sentiment | 5.5 |
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Negligible insider buying — $429,124 (0.004% of mkt cap)
Peer rank
6.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.0 |
| quality rank | 8.3 |
| growth rank | 3.5 |
- ▸Attractive P/E vs peers
- ▸Superior ROE vs peers
Technical
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 3.4 |
| support resistance | 2.9 |
| 52w position | 5.3 |
| gap | 5.0 |
Risk (lower is worse)
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 4.5 |
| days to cover | 6.1 |
| volatility | 4.7 |
| put call | 4.6 |
| implied vol | 4.9 |
| beta | 9.8 |
| debt equity | 0.0 |
- ▸Concentration risks: 2 HIGH, 3 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 7.8 |
| dividend safety | 5.2 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 510.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:4.6>=4.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:27d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:-0.3=NEGATIVE
- DEATH_CROSS:HARD_BLOCK
Warning (2)
- MOMENTUM:4.6<5.5 (soft — BUY_NOW allowed but watch)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.29
Upside
-2.6%
Downside
8.9%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 48
EdgeCatalyst-Driven — Earnings in 27d with 3/4 beat streak
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 3.4 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 6.1) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.3=NEGATIVE, DEATH_CROSS:HARD_BLOCK) reinforce the read. Current asymmetry R:R is -0.29 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 6.1, Peer rank at 6.0, and Catalyst at 5.9; the weakest are Growth at 2.5, Technical at 4.2, and Momentum at 4.6. The V9 engine flagged 2 failed gates with 2 warnings, producing an asymmetric reward-to-risk of -0.29 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Earnings Beat Track Record
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P2Free Cash Flow Quality Concern
Trip ifFree cash flow as a percentage of net income rises above 50% for 2 consecutive quarters.
- P3Limited Upside To Consensus Ceiling
Trip ifAnalyst consensus price target rises above $110, restoring more than 15% upside from current levels.
- P4Confirmed Downtrend Blocks Entry
Trip ifThe 50-day moving average crosses above the 200-day moving average and holds for 30 consecutive trading days.