I looked at Colgate’s numbers and it looks very good, this is a company that Warren Buffet would probably buy.
Colgate’s debt is not high, the debt ratio (liabilities / shareholder’s equity) is 0.62 – In other words, for every dollar in equity there is $ 0.62 in debt.
The company has a gross margin of 60% and a net margin of 16.86%, which looks great.
In addition to paying dividends, the company repurchases its own shares, $ 22 billion in repurchased shares.
The small size of the total assets means that the company has money left over for the repurchase of shares and dividends, the repurchase of shares decreases the total asset, causing the return on assets to be 18%. This ends up making it look like the company has a high debt, which is not true.
Interest expenses in 9M20 were US $ 107 million, around 0.88% of net revenue.
Certainly making toothpaste is more profitable than making cars, GM has high expenses with depreciation and is constantly having to make new investments in the industrial parks, toothpaste is made in the same way, they only change formulas over time.
It seems to me a great company to invest when there is the next fall in the stock market, currently it is traded at 25x profits.
Resume
| Name | Colgate | Great |
| Gross Margin | 60% | >= 60% |
| Net margin | 16.86% | >= 10% |
| Debt Ratio | 0.62 | =< 0.80 |
| Interest / Net revenue | 0.88% | =< 11% |
| Share buyback | Yes | Yes |
References
Warren Buffet and Balance Sheet Analysis
Colgate Quartely Report 3T20