Colgate-Palmolive (NYSE:CL) has been a strong performer among the recommendations in Motley Fool Inside Value; the stock has provided returns nearly double the S&P's 8.5% gain during the year it has inhabited our portfolio. Will the stock's winning streak continue? Wednesday's Q4 and full-year 2005 results could factor heavily in answering that question.

Wall Street Wisdom:

  • General consensus. Of the 18 analysts who follow the stock, most like what they see. Colgate receives 11 "buy" ratings, seven "holds," and not a single "sell."
  • Revenues. Analyst estimates call for the company to report sales growth of 5% tomorrow, to $2.95 billion.
  • Earnings. If that number doesn't wow you, consider that the analysts believe Colgate tripled that growth rate in profits and will report $0.68 per share of the quarter.

Margin watch:
If we take history as our guide, the chances of Colgate hitting the analysts' mark appear high. The people following this company seem exceptionally good at their job -- they've nailed the exact earnings number in each of the past four quarters. That said, Colgate's recent earnings trends suggest at least the possibility of an earnings miss. Although gross and operating margins have held steady for years, net margins have been on a long downward trend -- not usually the stuff of double-digit profits gains.

Margins%

6/04

9/04

12/04

3/05

6/05

9/05

Gross

55.2

55.1

55.2

55.1

55.0

55.1

Op.

21.0

20.7

20.5

20.1

19.8

20.2

Net

14.2

13.7

12.5

11.9

11.4

11.3

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Valuation metrics:
Analyst accuracy cuts both ways on Colgate. On the one hand, it suggests I'm probably wrong in thinking the company will turn in a weak quarter tomorrow. On the other, it lends credence to analysts' expectations of 10% long-term earnings growth from the company. If they're right on that, then Colgate looks a mite pricey at 20x times free cash flow, and pricier still at 24 times earnings.

Competitors:
Not that you could tell it from the company's rock-solid gross margins, but Colgate faces big-name competition in its market. Clorox (NYSE:CLX), Procter & Gamble (NYSE:PG), and Motley FoolIncome Investor pick GlaxoSmithKline (NYSE:GSK) are all formidable rivals.

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Fool contributor Rich Smith does not own shares of any company named above.