Would Warren Buffett Buy Colgate-Palmolive (CL) at ~22× Earnings?

Published on: Jan 08, 2026

Colgate-Palmolive is one of the most durable consumer staples franchises in the world, anchored by dominant oral care brands and unmatched global distribution. With stable margins, exceptional returns on invested capital, and recession-resistant demand, this analysis evaluates whether CL fits Warren Buffett’s definition of a ‘wonderful business’ — even at a premium valuation.

Would Warren Buffett Buy Colgate-Palmolive at ~22× Earnings?

Moat & Leadership — Exceptionally Durable (Score: 5.0/5)

Colgate-Palmolive possesses one of the strongest and most enduring moats in the entire Consumer Staples sector. Its flagship Colgate brand commands the #1 global market share in toothpaste, with leadership positions across Latin America, Asia, and emerging markets where brand trust and daily-use habits create extraordinary stickiness. Oral care is among the highest-frequency consumer purchases in the world, and Colgate’s scale, shelf dominance, and decades of brand equity create near-impenetrable barriers to entry.

Verdict: A textbook wide moat business — simple, repetitive, global, and extraordinarily difficult to disrupt.

Fundamentals — Very Strong but Mature (Score: 4.0/5)

Colgate’s fundamentals reflect the profile of a mature compounder rather than a growth engine. Over the past five years, revenue has grown ~5% annually, while EPS growth averaged ~5% as well. More recently, EPS growth accelerated to ~11% over the past three years, driven by pricing power, margin discipline, and operational efficiency rather than volume expansion. Net profit margin stands at a healthy 15.2%, and cash flow per share is a solid $4.48.

Verdict: Predictable, resilient fundamentals — exactly what long-term defensive investors want, even if growth remains modest.

Earnings & Capital Efficiency — Elite Returns, Financially Engineered (Score: 4.0/5)

Colgate’s capital efficiency is outstanding. ROIC stands at 28.4%, placing it among the best operators in the staples universe. Reported ROE is extraordinarily high due to aggressive capital structure optimization, including significant share repurchases and leverage — a common trait among mature consumer giants. While debt-to-equity appears elevated, cash flows remain stable and predictable, supported by recession-proof demand.

Verdict: Exceptional capital efficiency supported by stable earnings and disciplined capital allocation.

Valuation & Margin of Safety — Fair, Not Cheap (Score: 3.0/5)

Colgate trades at ~21.6× trailing earnings and ~21.1× forward earnings — a premium to the broader market but in line with its own long-term average. The PEG ratio of 5.7 highlights the reality that investors are paying up for stability, not growth. With the stock trading ~23% below its 52-week high, valuation risk is more muted than usual, but meaningful multiple expansion is unlikely.

Verdict: A fair valuation for quality and durability — suitable for stability capital, not aggressive return-seeking capital.

Risks, Competition & Disruption — Low but Structural (Score: 4.0/5)

Colgate’s risks are not cyclical but structural. Volume growth is limited in developed markets, private-label competition exists at the low end, and foreign exchange can weigh on reported results due to heavy international exposure. However, the essential nature of oral care, brand loyalty, and global distribution provide strong insulation against both economic downturns and technological disruption.

Verdict: Risks are well understood, manageable, and unlikely to impair long-term earnings power.

Buffett’s Lens — Would He Buy?

Colgate fits Buffett’s definition of a wonderful business — but at a price that reflects that quality. This is the type of stock Buffett would hold indefinitely once purchased at a reasonable valuation.

Conclusion — A Buffett-Grade Stabilizer (Overall Score: 16.0/20)

Colgate-Palmolive is not designed to beat the market in strong bull cycles, but it excels at preserving capital, compounding steadily, and protecting portfolios during economic stress. With elite brand power, unmatched global reach, and dependable cash generation, CL earns its place as a high-quality defensive holding rather than a growth-driven investment.

• Moat & Leadership — 5.0 / 5.0
• Fundamentals — 4.0 / 5.0
• Earnings & Capital Efficiency — 4.0 / 5.0
• Valuation & Margin of Safety — 3.0 / 5.0
• Total — 16.0 / 20 (High-quality defensive compounder)

For investors allocating capital from cash for stability rather than upside, Colgate-Palmolive fits squarely into a Buffett-style defensive sleeve — best sized modestly and held patiently.

More details about CL's moat, fundamentals, and valuation:
CL Stock Analysis