Company name Church & Dwight Co., Inc.
Stock ticker CHD
Live stock price [stckqut]CHD[/stckqut]
P/E compared to competitors Fair

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Fair
EPS growth Good
P/E growth Poor
EBIT growth Good

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $61.03
Target stock price (averages with growth) $72.51
Target stock price (averages with no growth) $59.3
Target stock price (manual assumptions) $63.75

The following company description is from Google Finance: http://www.google.com/finance?q=chd

Church & Dwight Co., Inc. develops, manufactures and markets a range of household, personal care and specialty products. The Company’s brands include ARM & HAMMER, (used in multiple product categories, such as baking soda, carpet deodorization and laundry detergent), TROJAN Condoms, XTRA laundry detergent, OXICLEAN pre-wash laundry additive, NAIR depilatories, FIRST RESPONSE home pregnancy and ovulation test kits, ORAJEL oral analgesics and SPINBRUSH battery-operated toothbrushes. The Company operates in three segments: Consumer Domestic, Consumer International and Specialty Products. During the year ended December 31, 2011, the Consumer Domestic, Consumer International and Specialty Products segments represented approximately 72%, 19% and 9%, respectively, of the Company’s net sales. On June 28, 2011, the Company acquired the BATISTE dry shampoo brand from Vivalis, Limited. In October 2012, it acquired Avid Health, Inc. (Avid).

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in this stock as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

 

Stock buybacks, in which companies take their own shares off the market by buying out the investing public don't always pay off for shareholders.

Companies must find ways to put their excess cash to use. When the market price of a company's stock is lower than the "intrinsic value" of its business—the present worth of the cash it will generate in the future—then the company should buy back all the shares it can.

But buybacks are far from an exact science. At their worst, buybacks can be a form of corporate cannibalism. Often the unspoken motive is to use extra cash to boost earnings per share by reducing the number of shares among which the company's profits are divided. But that can be a slippery slope.

But are investors better off? Imagine two companies, each with $100 in cash and 10 shares of stock. The intrinsic value of each is $10 a share. But the stock market undervalues one company's shares at $5 apiece and overvalues the other at $20. Each company decides to buy back $10 worth of stock. The undervalued company gets to buy back two shares at $5 each, leaving $90 in assets spread across eight shares. That raises the intrinsic value of each share to $11.25. The overvalued company uses $10 to buy back half a share, leaving the same $90 in assets spread across 9½ shares. That lowers the intrinsic value of each remaining share to $9.47.

So how can you spot a bad buyback? Here is a red flag: If cash is dwindling as buybacks are growing, the firm may be starving future growth to pay off present shareholders. That is fine if you sell into the buyback. But it is bad if you hang onto your shares. Owning a bigger piece of a corporate cannibal may leave you hungry in the long run.