Reasons To Buy, Hold And Sell Unilever plc

Here’s why investors have differing opinions on Unilever plc (LON: ULVR).

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unilever2Unilever (LSE: ULVR) (NYSE: UL.US) is one of the largest companies in the FTSE 100 and many private investors have differing opinions on the consumer group and its prospects.

So here’s a quick rundown of the key reasons why you may wish to buy, sell or simply hold on to the company’s stock.

Buy

Many Unilever bulls point to the May 2013 high of 2862p per share.  The group is still 11% off that high 16 months later.  This potential growth married with the satisfying reward of a 3.6% dividend yield is a tempting prospect for would-be investors.

Unilever still has it’s impressive moat with a huge range of over 1,000 well-known brand names worldwide with a staggering two billion people using them on any given day.  With such an established base, the group is able to continue to push into developing markets.

Hold

Despite the potential, growth so far this year has been slower than expected in emerging markets.  In Asia particularly macro-economic pressures have held back consumer spending.  It is an uncertain future in those markets right now so those who held shares would be forgiven for hunkering down a little while it plays out.

In addition to this, the first-half results highlighted that “Unilever is involved in a number of ongoing investigations by national competition authorities”.   Many investors should be wary at the potential impact of such investigations especially given the tough trading conditions.

Sell

Price is far from the whole story and Unilever is running at a price/earnings ratio of almost 20.  This is a little on the high side and although there is some scope for growth, such a large company cannot expect to shoot for the stars.  In fact the most recent annual results saw a mere 3% earnings per share growth.  This gives a price to earnings growth of 6.5 which would strike it from the list of many investors.

There are plenty of companies that exhibit greater growth potential than Unilever and it may be worthwhile searching out those instead.

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.

The Motley Fool owns shares in Unilever.

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