Why Unilever plc Is A Better Buy Than Experian plc Or Mondi Plc

Here’s why Unilever plc (LON: ULVR) looks set to beat its index peers Experian plc (LON: EXPN) and Mondi Plc (LON: MNDI)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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.

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 considered so you should consider taking independent financial advice.

Peter Stephens owns shares of Unilever. The Motley Fool UK owns shares of Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Bearded man writing on notepad in front of computer
Investing Articles

Down 75%, has the Deliveroo share price bottomed?

The last 12 months have been torrid for the Deliveroo share price. But does this open an opportunity to grab…

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

Is now FINALLY the time to buy Lloyds shares?

Lloyds shares have leapt in value as market confidence has improved. Should I buy the FTSE 100 bank before it…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

3 high-dividend FTSE 250 stocks to buy right now!

The London Stock Market is packed with top high-dividend stocks to buy. Here are a handful I'm considering buying, despite…

Read more »

Woman using laptop and working from home
Investing Articles

How I’m using my Stocks and Shares ISA to generate lifelong passive income

I’m looking to build a portfolio of assets that will pay me an income in my retirement. Here’s how I’m…

Read more »

Close-up of British bank notes
Investing Articles

Is this the best time in a decade to start buying FTSE 100 dividend shares?

UK dividend yields are rising again. I reckon any time is a good time to start buying dividend shares. But…

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

Director dealings: Rolls-Royce, Admiral, Dunelm

Director dealings can indicate whether a company's doing well. So, here are this week's biggest insider transactions at three FTSE…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

I’d start investing in the FTSE 250 with these 2 stocks

Were our writer completely new to the FTSE 250, he’d buy shares in these two companies today.

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

3 reasons I’d aim to earn extra income by investing £1,000 in dividend shares

Our writer has a lot of ideas to earn extra income. Here he explains why the one he likes the…

Read more »