Colgate-Palmolive: Wide Moat And A Mispriced Future (NYSE:CL)

Core Insights - Colgate-Palmolive Company is often underestimated when viewed solely through its basic product offerings like toothpaste and body wash, but a deeper analysis reveals significant business dynamics [1] Valuation Methodology - Various methods exist for determining a company's fair value, with the DCF method being complex and prone to biases, while the multiples approach relies on the assumption that peer companies are fairly priced, which is often not the case [1] - Reverse valuation starts from the market price and discount rate, working backward to uncover the free cash flow assumptions embedded in the price, providing a more straightforward assessment of market beliefs [1] - The Free Cash Flow to Equity (FCFE) model is utilized to determine what belongs to shareholders, calculated as Earnings + Amortization – CAPEX – average acquisition cost = FCFE, ignoring working capital and debt changes for clarity [1] - Forecasts employ the H-model, which features a 10-year two-stage growth fade, with terminal growth aligned to the risk-free rate, specifically the 10-year government bond yield [1] - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP, resulting in a clear and noise-free valuation of the business [1]