Is Now The Perfect Time To Buy Unilever plc, Burberry Group plc And A.G. Barr plc?

Are these 3 consumer stocks ripe for investment? Unilever plc (LON: ULVR), Burberry Group plc (LON: BRBY) and A.G. Barr plc (LON: BAG)

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in beverages company Barr (LSE: BAG) have fallen by over 5% today due to a profit warning. The seller of brands such as Panda and Irn-Bru has experienced a challenging first half of the year, with poor weather, tough trading conditions and a strong comparator from last year causing its bottom line to disappoint during the period.

In fact, its pre-tax profit declined from £19m in the first half of 2014 to £17m in the first half of the current year, with revenue also down from £135m to £130m. As a result, it now expects profit for the full-year to be at a similar level to last year, which is below previous market expectations of a 6% rise. And, with price deflation being a very real threat to the soft drinks market in the near term, it looks as though AG Barr will continue to struggle in the short run.

Despite its shares falling by over 5% today, Barr still trades on a relatively rich valuation. For example, it has a price to earnings (P/E) ratio of 18.8 which, for a business that is not due to post a rise in its earnings this year, seems rather high. And, while bottom line growth of 6% is forecast for next year, the challenging trading conditions being encountered are showing little sign of abating, which means that the company’s share price could come under pressure in the months ahead.

Also enduring a challenging period is Unilever (LSE: ULVR). The slowdown in China’s growth rate is a cause for concern and, as a result, its forecasts for the full year have been revised down somewhat. The company is now expected to post a rise in earnings of 10% this year and 6% for next year – both of which are impressive numbers given the uncertain outlook for the global economy.

Clearly, there is scope for downward revisions and, like Barr, Unilever trades on a rather high P/E ratio of 19.7. But, unlike Barr, Unilever has a huge portfolio of major brands which command vast levels of customer loyalty. Furthermore, it is extremely well-diversified in terms of its regional exposure. As such, and while its shares may dip in the months ahead, Unilever remains a superb long term buy.

Similarly, Burberry (LSE: BRBY) is in a similar position to Unilever regarding the slowdown in China. However, Burberry is also a well-diversified business in terms of its geographical exposure and in recent years has become a true lifestyle brand. This has allowed it to extend its price point upwards and become a more resilient and stronger brand through appealing to men and women across a wide range of product categories.

Looking ahead, Burberry is expected to increase its earnings by 10% next year, which puts it on a price to earnings growth (PEG) ratio of just 1.6. This indicates that its shares have considerable upside and, in the long run, it seems likely to perform relatively well.

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.

Peter Stephens owns shares of Burberry and Unilever. The Motley Fool UK owns shares in Unilever and has recommended Burberry. 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

Investing For Beginners

Here’s how I’m trying to prevent a stock market crash from ruining my portfolio

Jon Smith explains which shares he's avoiding and what he's thinking of buying to try and protect his portfolio from…

Read more »

Bearded man writing on notepad in front of computer
US Stock

Call me crazy, but here’s why I’m eyeing up the CrowdStrike share price

Jon Smith notes the carnage caused by Friday's global outage, but flags up why he's thinks the CrowdStrike share price…

Read more »

Investing Articles

What do Hargreaves Lansdown results mean for the share price?

The Hargreaves Lansdown share price has surged in recent months on takeover expectations, but what will the recent results mean…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Newly minted S&P 500 stock CrowdStrike just crashed! Here’s why

Shares of S&P 500 firm CrowdStrike collapse as the company lies at the centre of a global IT outage. What…

Read more »

artificial intelligence investing algorithms
Investing Articles

Is Nvidia heading for the mother of all tech stock crashes?

Nvidia stock has soared, and the company briefly became the most valuable on the planet. But not everyone’s an AI…

Read more »

Dividend Shares

The BP share price is down 15% in 3 months. Time to buy?

In the space of just a few months, the BP share price has fallen by a double-digit percentage. Is this…

Read more »

Investing Articles

A 5.4% dividend bargain I’ll buy over Lloyds shares

Harvey Jones loves his Lloyds shares but now he's found a high-yielding FTSE 250 stock that may offer even more…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Recommended by Warren Buffett, this top hedge fund’s betting on Rolls-Royce shares

When Warren Buffett ended his previous investment partnership, he recommended Bill Ruane’s Sequoia Fund. Today, its largest investment is in…

Read more »