Is There Still Time To Buy Unilever plc?

Can Unilever plc (LON: ULVR) move higher, or are the company’s shares overvalued?

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Right now I’m looking at some of the most popular companies in the FTSE 100 and wider market to try and establish if there is still time for investors to buy in.

Today I’m looking at Unilever (LSE: ULVR) (NYSE: UL.US) to ascertain if its share price has the potential to push higher. 

Current market sentiment

The best place to start assessing whether or not Unilever’s share price has the potential to push higher, is to take a look at the market’s current opinion towards the company.

At present, it would appear that Unilever’s shares are sought after, as investors seek solace in the firm’s defensive nature while the wider market wobbles.

Indeed, so far this year Unilever has outperformed the wider FTSE 100 by 6% and it looks as if this performance is set to continue as the company is expected to release an upbeat set of first quarter results later this week.

Upcoming catalysts

As mentioned above, the main catalyst for Unilever’s shares going forward is going to be the release of the company’s first-quarter results. 

Unilever caused City analysts to rethink their expectations at the end of 2013, after the group reported surprise underlying sales growth of 4.1% during the last quarter of the year, due to a strong performance within emerging markets.

However, since the end of 2013 Unilever has restructured its business, disposing of low-margin low-growth brands such as, Peperami, Skippy peanut butter, Wish-Bone salad dressing and Ragú pasta sauce.

Unfortunately, the disposal of these brands is likely to hit sales, although Unilever’s remaining portfolio of products is still attractive and the company’s profit margin should get a boost from the disposal of these low margin brands.

What’s more, there have been some rumors around the City that Unilever could unveil a £4 billion euro share buyback plan alongside first quarter results. 


As you would expect, due to Unilever’s defensive nature investors are prepared to pay a premium for the company’s shares. In particular, Unilever currently trades at forward P/E of 19.7 and offers a dividend yield of 3.5%.

However, while this valuation may seem a bit rich for some, it is actually similar to that of Unliever’s international peers.

For example, Unilever’s larger peer, Procter & Gamble currently trades at a forward P/E of 18 and smaller international peer, Colgate-Palmolive trades at a forward P/E of 20.  

Foolish summary

So overall, I feel that there is still time to buy Unilever. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert does not own any share mentioned within this article. The Motley Fool owns shares in Unilever. 

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