Clorox trades at $138.60 per share and has stayed right on track with the overall market, losing 12.8% over the last six months while the S&P 500 is down 8.1%. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Clorox, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Even though the stock has become cheaper, we're swiping left on Clorox for now. Here are three reasons why CLX doesn't excite us and a stock we'd rather own.

Why Is Clorox Not Exciting?

Founded in 1913 with bleach as the sole product offering, Clorox (NYSE:CLX) today is a consumer products giant whose product portfolio spans everything from bleach to skincare to salad dressing to kitty litter.

1. Long-Term Revenue Growth Flatter Than a Pancake

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Clorox struggled to consistently increase demand as its $7.17 billion of sales for the trailing 12 months was close to its revenue three years ago. This wasn’t a great result and is a sign of lacking business quality.

2. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Clorox’s revenue to stall, close to its flat sales for the past three years. This projection doesn't excite us and indicates its newer products will not accelerate its top-line performance yet.

3. Free Cash Flow Margin Stuck in Neutral

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Clorox’s margin was unchanged over the last year, showing it couldn’t improve. Its free cash flow margin for the trailing 12 months was 9.7%.

Final Judgment

Clorox isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 19.6× forward price-to-earnings (or $138.60 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

Stocks We Like More Than Clorox

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