Two weeks ago, I explained why The Boston Beer Company (NYSE: SAM) got hammered after releasing its second quarter results. In a single day, SAM fell 26% when the company reduced sales and earnings guidance for the rest of this year.

With the stock market at an all-time high, the penalty for underperforming is severe. The only justification for high earnings multiples is accelerating profits. And right now, there is a lot of pressure on companies to exceed the already high expectations of Wall Street.

That’s why shares of The Clorox Company (NYSE: CLX) fell nearly 10% last week after it released its latest quarterly results. The company reported earnings per share (EPS) of 95 cents while Wall Street was expecting $1.36.

In addition, Clorox guided for full-year EPS of $5.40 to $5.70 next year. Analysts were estimating EPS of $7.67 in 2022. That’s a huge miss.

Quite frankly, I’m surprised that CLX didn’t fall farther than it did. In almost every respect, its quarterly report was a disaster.

However, this year’s quarterly results for Clorox are being compared to a highly unusual period last year. As you may recall, demand for Clorox products skyrocketed during the worst of the coronavirus pandemic.

Now, demand is back to normal and this year’s numbers look anemic compared to 2020. During the quarter, diluted net EPS for Clorox plummeted by 68% versus last year.

Business as Usual

There are some businesses that will get a tailwind from the pandemic long after COVID-19 has been purged from the populace. For them, a higher earnings multiple is warranted.

But for others, such as Clorox, the departure of the virus will mean a resumption of business as usual. Their earnings multiples should go back to what they were two years ago before anyone ever heard of COVID-19.

Essentially, that is what is happening to Clorox. A quick look at its stock chart reveals that it is now positioned along the growth curve it was on prior to last year.

From a long-term perspective, last year’s bump in CLX share price sticks out like a sore thumb (circled area in the chart above). But even after its big drop, the stock has more than tripled in value over the past 10 years.

Now, CLX is trading exactly where it was 18 months ago, just before the pandemic took off.

Ready for Takeoff

Guess what? The coronavirus pandemic is once again taking off. On July 30, the daily case count for COVID-19 in the United States was higher than it has been since February. In China, it’s getting so bad that the country has reimposed severe social distancing restrictions in dozens of cities.

Despite that troubling news, there has been no discernible uptick in CLX in anticipation of another run on disinfecting supplies. But that may change after Labor Day when students return to school and workers begin reporting back to their offices.

For that reason, now could be an auspicious time to buy a call option on CLX. A call option increases in value when the price of the underlying security goes up.

Last week while CLX was trading near $166, the call option that expires on January 21 at the $165 strike price could be bought for $10. For that trade to be profitable, CLX must rise above $175 within the next five months.

If the stock makes it to $185 by then, an 11.4% increase from its recent price, this option would double in value. All it would take is one more bout of panic buying for that to happen.

Of course, there is also the risk that this option could expire with no value. For that to happen, the current COVID-19 outbreak would have to dissipate quickly.

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