About Unilever

This is one of the most “you don’t recognize the parent company’s name but you know their brands” conglomerate stocks ever.

This company’s products have probably been in your head, stomach, mouth and armpits.

Interested yet?

This company is one of the primary domineers of your local CVS, Dollar General and/or Walgreens along with various other retail establishments for that matter.

It’s Unilever time.

By this time you’re likely wondering which brands are under Unilever’s corporate umbrella, some such as Dove, Ben & Jerry’s, Hellmann’s, Magnum ice cream, Seventh Generation, Axe and Vaseline might ring a bell.

Headquartered in London, England, Unilever is one of the largest consumer goods companies in the world among the likes of Procter & Gamble, Church & Dwight, Reckitt and Nestle to name a few.

While we’ve written articles on international companies in the past, demand from our viewers has been high so we must give the people what they want!

Let’s get a bit more familiar with Unilever and whether or not you should consider adding the consumer staple to your ever so important and treasured investment portfolio.

Unilever’s stock financials

The company has a market capitalization of a whopping $111.37 billion, a price-to-earnings (P/E) ratio of 18.45 and distributes an annual dividend of $1.87 to its shareholders.

According to the company’s present P/E ratio, the stock is trading at just about fair value or what it’s worth paying for.

This should make things interesting as we delve further into the company’s figures.

Before moving on, we would like to briefly mention that with just a quick glance of the company’s five year stock price chart, the returns (or really, lack thereof) have been far from impressive or encouraging. Specifically, the company’s stock is down nearly 24% over the past five years while avid competitors such as Procter & Gamble’s share price is up nearly 40% within the same time frame.

Frankly, we don’t know the rhyme or reason of this phenomenon, if there is even one to be discovered in the first place.

Nevertheless, it does happen with other companies and their respective stocks as well. For instance, another example of this happening is with Cintas and Aramark. 

Cintas’ stock has seen a rise of nearly 168% over the last five years whereas Aramark’s stock has actually seen a moderate decline in share price during the same time period. Although both companies are engaged in very similar industries and lines of work, one company’s stock has performed a lot better than the others.

Thankfully, our job isn’t to necessarily pin down the exact reason for this occurrence, but to dig into individual companies and unveil how compelling (if at all) their financials and other related key metrics are paired with the macroeconomy. 

Let’s keep digging.

As previously stated, Unilever’s stock appears to be trading for around what it’s worth, which is refreshing compared to its competitors’ stock prices that seem to be either entering or already trading in overvalued territory.

When it comes to Unilever’s balance sheet, the company’s executive team manages just north of $75 billion in total assets along with approximately $58 billion in total liabilities.

So typical, but in a good way.

We initially expected Unilever’s total assets to outweigh its total liabilities by a “not too slim, not too wide” margin and that’s exactly what we got, which is to be expected for a consumer packaged goods (CPG) conglomerate as large and established as Unilever.

Usually, particularly in the consumer goods space, boring balance sheets tend to hint at boring, relatively flat total revenues.

Thank you, Unilever, for not being an exception.

Specifically, the company’s total revenue over the last five years has ranged between $50.7 billion and $53.7 billion which is neither good nor bad. 

It could indicate that consumers are still buying Unilever’s products at roughly the same rate each year or Unilever has left some markets and successfully ventured into new ones. Either way, we think it’s definitely fair and realistic to expect consistent $50 billion range revenues from Unilever going forward.

Additionally, according to the company’s cash flow statement, scoring a consistent net income has been no problem for Unilever as it has typically stood (over the last five years) at $6 billion.

We actually quite enjoy Unilever’s innate ability to generate reliable net income and relatively large yet consistent amounts of cash in the process, as the CPG space is unforgiving and constantly changing, not to mention quite vulnerable to supply chain disruptions, big or small.

Unilever’s stock fundamentals

The moment of truth has arrived.

Ok, that was slightly dramatic but one of the primary boxes we like to check, especially for companies in the CPG ecosystem is profitability.

As we’ve highlighted in previous articles regarding retailers, the margins tend to be low in both spaces (CPG and retail) and any inch gained over the competition is not only encouraged but required to survive for the foreseeable future.

Unilever is surviving just fine.

According to TD Ameritrade’s platform Unilever’s trailing twelve month (TTM) net profit margin currently sits at 11.44% to the industry’s average of 8.36%. 

This should be comforting to investors in it for the long run.

As we projected that Unilever’s TTM net profit margin would’ve been about par with the industry’s average, it’s good to know that Unilever has actually been able to carve out an even more competitive profit even amidst industry-wide and worldwide challenges.

In terms of returns, the company’s TTM returns on equity and investment are both slightly lower than that of the industry average whereas its TTM returns on assets are around 3% higher than the competition.

This is a long term business in every meaning of the phrase, so we’re not awfully concerned with Unilever’s core return metrics being ever so slightly above or below the competition. We’re just glad its metrics are at or near the competition’s in the first place.

Should you buy Unilever stock?

The main figures behind Unilever are surprisingly more convincing that we had initially imagined. 

The company’s revenues have been consistent, its balance sheet is trim, its TTM net profit margin is strong and Unilever is home to some of the most well known and used brands in the world, allowing it to maintain somewhat of a recession proof business model.

While we think it wouldn’t be a bad idea to pick up shares in this company in the later stages of the recession so as to buy them for a slightly steeper discount, the numbers say this company is quality and worth buying today, from our perspective.

Given all of this information we give Unilever’s stock a “buy” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.