Kimberly Clark (NYSE:KMB) is a strong company that does what consumer staples stocks do best: provides reliable growth in revenue and profits, and a hefty dividend to shareholders. Those are the traits that make consumer staples stocks very appealing to more risk-averse investors such as retirees who desire relative safety and investment income. But whether these qualities make Kimberly Clark stock a buy right now is a different question.

That's because Kimberly Clark stock has had a great run over the past few years. Shares now trade for around $113 apiece, which represents a 37% rally over the past two years. And that doesn't include Kimberly Clark's dividend payments in that time. As a result, the stock holds a lofty valuation that should make you think twice before buying the stock.

With that in mind, here is why it might be wise to wait for a better entry point before buying shares of Kimberly Clark.

Growth is good, but not that good
Kimberly Clark has done well in the years since the Great Recession ended. Revenue and earnings-per-share growth regularly clock in at mid-to-high single digits on a percentage basis. That's no surprise, since the company holds a number of strong brands including Kleenex and Huggies. Plus, Kimberly Clark's growth has been boosted by its status as a global company. International sales have done a lot of the heavy lifting for the company for several years now. This is particularly true in the emerging markets, where economies are growing much faster than in North America.

For example, total sales excluding currency effects grew 4% last quarter, year over year. International sales led the way, with double-digit growth. The company's diapers sold very well in emerging markets. Diaper sales soared 25% in both China and Russia and increased 10% in Brazil.

There's nothing at all wrong with these results. Whether they justify such an impressive rally, however, is debatable. This year, Kimberly Clark expects full-year earnings of $5.98 per share at the midpoint of its guidance, which would represent 8% growth year over year. This is good enough, but it's no guarantee that investors will continue to bid up the stock to higher valuation multiples with high-single-digit earnings growth. At some point, the expectations placed on the company through its aggressive valuation will outpace its underlying earnings growth, and a sell-off in that case is entirely possible.

What's changed since last quarter
In a similar article in late August after Kimberly Clark's previous quarterly earnings I wrote more favorably about the stock. The differences between then and now, after the most recent quarterly report, are that Kimberly Clark's earnings were more modest than I expected, yet the stock has continued to rise. The combination of these two factors brought Kimberly Clark's valuation to an uncomfortable level. At 20 times earnings, the stock is far from a bargain.

There's certainly nothing wrong with the company's fundamentals. Growth is particularly strong overseas. Unfortunately, domestic growth has slowed, and Kimberly Clark's international success is not enough to offset that. For example, sales of Kimberly Clark's flagship personal care products, which make up 45% of its total revenue, rose just 3% last quarter. This included a 1% decline in personal care sales in North America.

As a result, for a consumer staples stock with better value and income potential, there are stronger choices for Fools.

Investors buying for the dividend can look elsewhere
It seems that investors might be flocking to Kimberly Clark for its yield. Indeed, Kimberly Clark stock pays a nice 3% dividend yield. And the company has a long track record of paying dividends, which can give investors a lot of confidence in its dividend. Kimberly Clark has paid uninterrupted dividends for the past 80 years.


Lack of a clear buy signal gives pause
Kimberly Clark is a highly profitable company with a number of strong brands. It has a diversified business across several product categories and geographic markets. Shareholders have been rewarded for this with very strong returns over the past few years. And, Kimberly Clark's solid dividend yield is just icing on the cake.

However, it's reasonable to question whether such impressive returns can continue going forward. Thanks to its incredible rally since the recession ended, Kimberly Clark holds a fairly aggressive valuation. The market is clearly pricing in some generous growth expectations for Kimberly Clark, which does not seem entirely realistic. Consumer staples giants such as Kimberly Clark shouldn't be expected to produce more than mid-single digit earnings growth, which is about what management forecasts for this year.

Because of this, investors would be wise to wait for a decent 10%-15% pullback before jumping in to buy Kimberly Clark.