COLGATE PALMOLIVE CO (CL) stock intrinsic value fair value estimate & owner earnings analysis

Colgate-Palmolive sells toothpaste, toothbrushes, personal care and home care products worldwide, plus Hill's Pet Nutrition. In 2025 net sales were $20.4 billion, of which Oral, Personal and Home Care was $15.8 billion and Hill's about $4.6 billion. The core of the franchise is oral care: Colgate held 41.3% of the global toothpaste market in 2025, which supports gross margins around 60%. 2025 was a low-growth year. Organic sales rose 1.4%, gross margin slipped to 60.1% from 60.5% (raw and packaging costs took about 4.2 points of margin, and cost savings, higher pricing and mix recovered most of it), toothpaste share slipped 0.4 points, and Asia Pacific organic sales fell 1.0% on weakness in Greater China and India. HOW WE MEASURED EARNINGS. We start with operating cash flow, remove the swings in receivables, inventories and payables (which reverse over time), subtract stock-based compensation ($155 million in 2025) as a real cost, and subtract only the capital spending needed to maintain the business ($555 million of the $564 million spent in 2025; the rest is treated as growth spending). On that basis owner earnings were $3.88 per share in 2025 versus $3.73 in 2024. Because we value the business first and subtract its debt separately, we then add back the cash interest paid ($270 million in 2025), which gives $4.21 per share for 2025, up 2.7% from $4.10 in 2024. For 2021 through 2025 this figure was $3.52, $3.07, $3.35, $4.10 and $4.21. We set the starting level at the five-year median, $3.52, deliberately below the last two years: the 2022 figure showed how quickly input-cost inflation can cut cash flow (about 13% below our starting level), and raw and packaging costs were a 4.2-point drag on gross margin again in 2025. ACCOUNTING JUDGEMENTS. In 2025 the company wrote down its Filorga skin-health business by $919 million ($582 million of goodwill plus $337 million of the trademark and customer relationships, leaving almost nothing). These are non-cash charges tied to a past purchase price, so they are added back rather than counted against ongoing earnings. Because accumulated goodwill write-offs have now grown from $699 million to $1,281 million, we treat repeated acquisition losses as a real risk and carry it in the bear case. Intangible amortization is small ($78 million in 2025), so there is no large wasting asset being treated as permanent. The 2023 and 2025 pension-litigation charges ($267 million and $65 million) were mostly non-cash pension obligation increases, with $34 million paid from plan assets in 2025. BASE CASE ($60.84 per share). The business is worth about $71.3 per share before its lenders and outside owners. The starting level of $3.52 grows 2.5% a year for ten years and is then held flat. Year one growth of 2.5% is below the 2.7% actually delivered in 2025. Growth we credited is limited to what the company has done repeatedly: net selling price increases (positive in Latin America, Europe, Asia Pacific and Africa/Eurasia in 2025) and steady share repurchases funded from its own cash (diluted shares fell from 898 million in 2016 to 802 million in mid-2026, about 1% a year). Per-share owner cash flow compounded about 4.6% a year from 2021 to 2025, so 2.5% is well under the demonstrated pace. We left out new products, Hill's expansion, emerging-market growth, any recovery in skin health, and any margin improvement, and we credit no growth after year ten because we can name no driver for it; the level simply persists. BEAR CASE ($38.16 per share). Cash flow falls back to the 2022 level of $3.07 per share and then erodes 1% a year for ten years, roughly the rate at which toothpaste share slipped in 2025 (0.4 points from 41.7%), with costs of raw and packaging materials still pressing margins and further acquisition write-offs likely. After year ten the lower level is held flat. The business is worth about $47.3 per share. BULL CASE ($84.12 per share). The 2025 level of $4.21 per share, which the company has already achieved, grows 4.0% a year for ten years, still below the 4.6% compounding of 2021 to 2025, and is then held flat. This assumes the pricing and buyback pattern above continues with no repeat of the 2022 cost squeeze. The business is worth about $96.0 per share. DEBT AND OUTSIDE OWNERS. At June 30, 2026 borrowings were about $7.86 billion against $1.37 billion of cash, a net $6.49 billion ($8.09 per share). The notes carry an average interest rate near 2.9%, well below 6%, fixed for years (maturities as of December 2025 were $523 million in 2027, $615 million in 2028, $591 million in 2029, $500 million in 2030 and $4.5 billion after that), so we reduced the debt figure by about $1.2 billion, to about $5.27 billion or $6.57 per share. Partly owned subsidiaries have outside holders who received roughly 5% to 6% of net income in 2023 to 2025; we deduct 5.5% of business value, which is $2.60, $3.92 and $5.28 per share in the bear, base and bull cases. Net of debt and outside owners, the shares are worth $38.16 (bear), $60.84 (base) and $84.12 (bull). Interest of $270 million is covered more than ten times by operating cash flow, and no maturity or covenant materially threatens any of the cases. WHAT CHANGED FROM OUR EARLIER ESTIMATE. Our last estimates were $26.51, $46.62 and $59.31 per share. The main reason for the increase is that we now value every business with the same 6% required return, where the earlier work used 10%, and we now value the business before debt and subtract debt and outside owners separately. Some changes point the other way: we now remove working-capital swings and use a lower starting level ($3.52 per share of pre-interest cash flow, versus $3.87 of after-interest owner earnings before), and we have added the Filorga write-off risk to the bear case. WHAT WE CHECKED. The main risk to the starting level is that 2024 and 2025 flatter the business. In 2025 gross margin fell despite pricing, so we did not lift the level to those years. The first half of 2026 looks consistent with the base case: net sales rose 6.6% to $10.69 billion and operating cash flow was $1.74 billion versus $1.48 billion, but it takes several more quarters to move our starting level, and we could not compute first-half owner earnings because the payables detail is not in the quarterly data. WHAT WOULD MAKE THIS WRONG. Renewed raw-material inflation that pricing cannot offset, continued toothpaste share loss to lower-priced brands, currency devaluation in Latin America (about $4.8 billion of sales), or more acquisition write-offs. MARGIN-OF-SAFETY PRICE. The margin-of-safety price is $34, about 44% below the base case and 11% below the bear case. A price at which the cases imply 20% a year requires a deep discount even for a stable franchise, and the estimate allows extra room for emerging-market currency exposure and margin pressure.