Church & Dwight (CHD)

Total return at 5 years: 3.7%/year = 2.3% appreciation + 1.3% dividend. The target price ($112) is ex-dividend; the $7 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $91 · Multiples $96) is below the market price ($100).

Today — expensive, no margin of safety: at $100 trades ~4.1% above its value discounted to today (~$96); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Preserva valor: the target price ($112) plus dividends yield just enough to preserve nominal capital, below the required 4% floor.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$60.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($100) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (4.6%/year) above our base case (2.8%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$1.2 bn of owner earnings in year 5 (vs ~$1.1 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on EV/EBIT (suma de las partes). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 = TTM to 30-Jun-2026 (10-Q). Year 1 is anchored to the FY2026 guidance the company raised on 31-Jul-2026 (8-K, Item 2.02): revenue flat to +1% (midpoint +0.5%) and reported earnings per share +20-22% (midpoint +21%, on reported FY2025 EPS of $3.02 → ~$3.645), the two anchors of the guidance. The year-1 margin jump (17.5%→~19.7% EBIT) is not aggressive: it is direct arithmetic from the guidance —reported FY2026 earnings grow much faster than revenue because they stop repeating the FY2025 charges (the exits of Flawless/Spinbrush/Waterpik showerheads $45.6M and the sale of the vitamins and supplements business $58.5M, neither recurring), not because of an extraordinary operating improvement. Trough and recovery in year 2 (reported revenue nearly flat in year 1 on the drag from divestitures, accelerating to ~3.5-4% once the comparison normalizes): the rebound-from-a-trough exception of ≤5% under rule R3 (§5) is invoked, declared here. Years 3-5 decay smoothly toward the durable band for a consumer product (3-6%). Sum of the parts: Consumer (Domestic + International, ~96% of EBIT) valued at the EV/EBIT of a branded consumer product; the Specialty Products Division (~4% of EBIT, B2B industrial chemicals — bulk bicarbonate, animal nutrition) at a low commodity/industrial multiple. Today's entry multiple compresses toward the blended terminal (~17.7× base) — compression that is defensible given decelerating reported growth. Material net buybacks (TTM buyback $600M, FY2025 $900M, ~2.4% of market capitalization a year) modeled via a moderate share path (price-aware: the entry multiple offers no discount that would justify accelerating the historical pace).

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $112 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $100, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $112 in 5 years plus $7 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $96. Against the current market price ($100), the margin of safety is -4.1% (trades above the maximum → a premium is paid) and the total return at that price would be 3.7% annually.

• Multiple vs. quality. EV/EBIT 24×—expensive vs. the terminal mix (~17.7×) after compression.
• Reverse-DCF. Price already factors in much of the just-guided acceleration; little margin if organic growth disappoints beyond 2026.
• Margin of safety. Total return +4% in the lower end of the method's scale.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (112%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• ROIC exceeds cost of capital. Return on invested capital to be tested against the 10% bar—capital-light model with low capex (~2% of revenue).
• Margin and stability. TTM EBIT margin 17.5%, depressed by non-recurring restructuring charges in 2024-25 (vitamins and supplements brand impairment, business exits); normalizes toward ~19-20% once they stop repeating.
• Quality of cash. Capex TTM ($145.2M) below D&A ($249.4M)—no net growth capex, consistent with a mature business. FCF backed by real operating cash (OCF TTM $1,215.4M).

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The engine of a mass consumer staple is volume × price/mix per brand and segment. In Q2'26 combined organic sales growth mixed volume +4.3% and price/mix +1.5% at consolidated level, with International leading (volume +7.3%) over Domestic (volume +3.6%) and SPD (volume +1.3%). E-commerce (25.5% of consumer sales, +22.7% YoY) is the clearest evidence of channel shift; the company attributes approximately half of annual organic growth to new launches.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real, not nominal. Organic (+5.8% in Q2'26) is real, but reported consolidated is dragged by 2025 divestitures—have to read both series together.
• Growth engine. Volume + price/mix combined (Q2'26: volume +4.3%, price/mix +1.5%), with International leading; innovation explains ~half of guided annual organic.
• Deceleration and cycle. Reported decelerated from +9.2% (FY23) to +1.6% (FY25); FY2026 guidance re-accelerates it to flat/+1% reported (organic +4-5%) after two upward revisions.

• Relevant in 10 years (recurrence). Daily/repeated consumption of basic categories (hygiene, cleaning, personal care)—high recurrence, though lower predictability than a unique global leader.
• Pricing power. Real but uneven: holds price/mix in most categories, but loses volume vs. private label in stain removers, diagnostic kits and oral analgesics.
• Moat and its direction. Wide moat (#1/#2 positions in most categories) but with an erosion direction already materialized: the Waterpik brand's fair-value cushion fell from 135% to 117% in the latest test.
• Capital cycle. Mature consumer staples categories; the risk is not so much new capital entry but private label from the retailers themselves.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• !Leverage (net debt / EBITDA)Net debt / EBITDA 1.5x
• ✕Interest coverage (EBIT / interest)0.0x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 112% of ROIC
• !Value creation (ROIC − 10% bar)+3pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.6x — no over-investment
• –Float / working capitalNeutral WC
• ✓Dilution (SBC % of revenue + shares)SBC 1.1% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Long-term debt $2,205.1M, entirely at fixed rate (4.1% weighted average) and no maturities before August 2027 — manageable for a defensive, cash-generative business.
• Coverage and cash. TTM OCF $1,215.4M; unsecured revolver of $2,000.0M undrawn at year-end 2025. Solid balance sheet, no signs of stress.
• Quality of balance sheet. No material pending litigation disclosed in the filing; no known pending restructuring charges beyond those already recognized in 2024-25.

• Skin in the game. No insider holdings data in this pass (DEF 14A proxy not extracted)—pending completion.
• Capital allocation. Sustained capital return (buybacks $900M + dividend $287.2M in FY2025) plus active M&A in high-growth brands (Touchland, with the contingent payment already raised to $159.0M for strong performance); the full impairment of the vitamins and supplements brand in 2024 ($357.1M) is the signal of M&A that did not work out.
• Integrity / normalization. Guidance raised twice in the year with detailed GAAP/non-GAAP reconciliation and transparent disclosure of portfolio restructuring charges.

• No clear source of discount: the year's two guidance raises are already known to the market.
• The market already rewards recent organic acceleration (+5.8% in Q2'26) and capital allocation discipline (sustained buyback + dividend).
• The known risk (private label erosion in specific categories, already visible in the Waterpik brand's cushion) is already partially priced in, but the projected return does not leave much room if growth disappoints.

No missing buyers or motivated sellers identified → not cheap; a quality business after a known guidance improvement already priced in. Total return (+4%) lands in the lower end of the method.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -6%/year (-25% total): the margin of safety protects the downside. The bull (+11%/year, +67% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Private label (pricing power). The structural disconfirmer: distribution loss already observed in stain removers, diagnostic kits and oral analgesics versus private label, and the Waterpik brand's cushion falling from 135% to 117%.
• Demanding multiple. 24× EV/EBIT—multiple compression if guided acceleration doesn't sustain.
• Customer concentration. Walmart ~23% of consolidated net sales; top four customers ~44%, no long-term contracts.
• Recent M&A integration. Touchland and Miss Mouth's are 2025-26 acquisitions still unproven in their long-term fit within the growth algorithm.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: wide moat, eroding.

• Peter Lynch Growth at a reasonable price (GARP)

  A slow grower growing 3% at a multiple/growth of 8.5 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 4% (EBIT/EV) + ROIC 13% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 5%, in line with our 3%: perception and reality aligned.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -7%/yr, bull-scenario ceiling +10%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, eroding; sources: intangibles, efficient scale, cost advantage → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price implies 5% vs our 3%: coherent, but at the optimistic end of the range.