At first blush you'd think Kimberly-Clark (KMB) couldn't loose. In both good times and bad, people need Kleenex tissues, Huggies diapers and Scott paper towels.

Of course there's plenty of competition from powerhouse Procter & Gamble (PG) (Charmin, Pampers, Bounty), not to mention store brands. And rising commodity costs are a concern (the super-absorbent polymers that make diapers so effective are synthesized, ultimately, from oil.)
And yet we're bullish on Kimberly-Clark's stock, especially in light of its recent third-quarter results. Earnings blew past Street estimates and the company raised its outlook. Furthermore, margins expanded across all its business segments despite lower sales and cash flow from operations came to $791 million. As BMO Capital Markets analyst Connie Maneaty told clients, Kimberly-Clark is converting to cash at its fastest rate since the first quarter of 2006. Not too shabby, indeed.

The impressive results only make the relative valuation that much more compelling. Shares offer roughly a 35 percent discount to the S&P 500 ($INX) on a forward earnings basis, and a 20 percent discount to their own five-year average, according to Thomson Reuters. By price/earnings-to-growth (which measures how fast a stock is rising relative to its growth prospects), shares trade at a discount of 35 percent to the broader market as well as their own five-year average.

Then there's the dividend, which currently yields a generous 3.9 percent. Throw in the Street's average price target and you get an implied upside of nearly 17 percent in the next 12 months or so.