How Will Clorox (CLX) Stock Be Affected By The U.S.'s Investigation of Carl Icahn (IEP)?

NEW YORK (TheStreet) -- Shares of The Clorox Co. (CLX) are down about 1.0% after a U.S. insider trading investigation of Carl Icahn's  (IEP) attempt to buy Clorox in 2011 has been hampered by reports tying it and trades in Dean Foods Co. (DF) to golfer Phil Mickelson and sports gambler William Walters, sources told Bloomberg.

Investigators are reviewing large option trades ahead of Icahn's $10.2 billion offer for Clorox, as well as trading by Mickelson and Walters in Dean Foods in 2012, the source said.

None of the three individuals has been accused of any wrongdoing.

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TheStreet Ratings team rates CLOROX CO/DE as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CLOROX CO/DE (CLX) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, increase in stock price during the past year, increase in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Products industry and the overall market, CLOROX CO/DE's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $220.00 million or 37.50% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.57%.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the Household Products industry average, but is less than that of the S&P 500. The net income increased by 3.0% when compared to the same quarter one year prior, going from $133.00 million to $137.00 million.
  • 44.95% is the gross profit margin for CLOROX CO/DE which we consider to be strong. Regardless of CLX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.88% trails the industry average.
  • You can view the full analysis from the report here: CLX Ratings Report

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