Should Passive Income Investors Buy Colgate Palmolive Stock?

Parkev Tatevosian, CFA•Jul 30, 2026

Summary

Parkev provides an update on Colgate-Palmolive, a stock he has recommended throughout the year, to assess if it remains a buying opportunity. He notes the stock has appreciated over 16% year-to-date, outperforming the S&P 500 with significantly lower risk.

Parkev details the company's financial performance and valuation:

**Revenue Growth**: Colgate-Palmolive has shown impressive revenue growth for a consumer staples company, with trailing 12-month revenue reaching $20.8 billion, up from $15 billion in 2017. This growth is achieved through ongoing acquisitions and divestitures to optimize its portfolio.

**Profit Margins**: The operating profit margin has declined from over 26% in 2017 to 21.9%. Parkev attributes this to headwinds like tariffs and consumers trading down to store-branded products as personal disposable incomes decrease, impacting premium brands.

**Capital Allocation**: Parkev is particularly impressed by the company's return on invested capital (ROIC) of 24% against a weighted average cost of capital (WACC) of 7.1%. This results in an ROIC to WACC ratio of over 3:1, which he considers one of the most impressive among companies he covers.

**Dividend and Risk**: While the 2.28% dividend yield is less than a 10-year government bond, the stock offers significant upside potential from share price appreciation. Its beta of 0.32 indicates exceptionally low volatility and risk compared to the S&P 500, meaning it experiences smaller movements both up and down.

**Valuation**: The stock currently trades at a forward price-to-earnings (P/E) ratio of 22.7, which is about 10% higher than its valuation at the start of 2026. However, Parkev's discounted cash flow (DCF) model indicates the stock is undervalued, calculating a fair value of $127 per share against its current trading price of $92 per share.

Considering these factors, Parkev reiterates his "buy" rating for Colgate-Palmolive, maintaining a medium conviction level.

Mentioned Stocks

Sentiment: BUYAction: RECOMMENDED

Reasoning: Parkev highlights Colgate-Palmolive's impressive revenue growth and exceptional return on invested capital (ROIC of 24% vs WACC of 7.1%, a 3:1 ratio). While profit margins have decreased due to tariffs and consumers trading down, the stock offers considerably lower risk with a beta of 0.32, outperforming the S&P 500 year-to-date. Despite trading at a forward P/E of 22.7, which is slightly above its early 2026 level, Parkev's discounted cash flow model values the stock at $127 per share, indicating it is undervalued at its current price of $92 per share. He reiterates his "buy" rating with medium conviction.

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