2015 has been a surprisingly strong year for Unilever (LSE: ULVR) (NYSE: UL.US), with the global consumer goods company posting share price gains of 8% since the turn of the year. That’s despite emerging markets enduring a challenging period, which shows that investors are still thinking long term when it comes to the company’s growth prospects.
Of course, Unilever continues to offer hugely consistent growth. Its track record provides evidence of this, with the company posting a rise in its bottom line in four of the last five years.
Similarly, consumer credit company, Experian (LSE: EXPN), also has a very strong track record of growth, with its earnings having risen in each of the last five years. And, looking ahead, further growth is expected, but the price that investors are being asked to pay for the company’s forecasts appears to be rather high.
For example, Experian is due to see its bottom line rise by 1% in the current year, and by a further 7% next year. That’s a rather pedestrian rate of growth and is behind the growth rate of the wider index. Despite this, Experian trades on a relatively high price to earnings (P/E) ratio of 19.7, which when combined with its growth potential equates to a price to earnings growth (PEG) ratio of 2.6.
As a result, Unilever seems to have more appeal than Experian due to a higher growth rate (its bottom line is forecast to rise by 14% this year and 7% next year), while Unilever’s PEG ratio of 1.5 seems to be very reasonable given the size, scale and stability of the consumer play.
Meanwhile, packaging company Mondi (LSE: MNDI) also offers excellent bang for your buck. It trades on a PEG ratio of just 1.6 and, despite seeing its share price soar by 36% since the turn of the year, could move significantly higher over the medium to long term.
Like Unilever and Experian, Mondi has a great track record of growth, with its bottom line having risen in each of the last five years. It has a very efficient business model and has control over much of its supply chain, which affords it a considerable consistency and predictability of performance. Furthermore, it has a strong balance sheet and appears to be a highly sustainable business.
However, where Unilever has an advantage over Mondi is with regard to its long term growth potential. That’s because Unilever has invested heavily in ensuring that its products gain sufficient exposure in emerging markets so as to begin developing customer loyalty. And, as the wealth of the emerging world increases, Unilever is likely to find itself in a dominant position in terms of developing brand loyalty, and also in expanding its margins in the developing world.
As such, Unilever seems to have the most enticing long term growth outlook of the three stocks and, alongside the most appealing valuation, it appears to be the preferred choice of the three.