2015 has been a surprisingly strong year for Unilever (LSE: ULVR), with its shares rising by 6% versus the FTSE 100’s fall of 2% since the turn of the year. This outperformance is perhaps unexpected, since Unilever is very much focused on emerging markets, with around 60% of its sales being derived from the developing world. However, with the future growth rate of such economies being called into question this year, many other emerging markets-focused stocks have seen their share prices fall, while Unilever has continued the run which has seen its valuation soar by 115% in the last ten years.
Clearly, Unilever is not a cheap stock, with its shares currently trading on a price to earnings (P/E) ratio of 21.3. However, given its long term growth potential it could be argued that Unilever is deserving of an even higher rating – especially when its track record of strong, stable growth and its excellent range of brands are taken into account.
Furthermore, Unilever remains a superb income play, with its shares yielding 3.3% and dividends being covered 1.5 times by profit. This shows that there is scope to pay out a higher proportion of profit as a dividend, while earnings growth of 8% this year and 6% next year indicate that Unilever’s dividends per share should rise at a considerably higher than average rate over the medium to long term.
Burberry (LSE: BRBY), meanwhile, has struggled to appeal to investors this year, with its relatively high dependence on China meaning that its shares have fallen by 8% since the turn of the year. And, in the short run, it would be unsurprising for there to be further pressure on its valuation as a key part of its growth strategy is to expand in China.
However, China continues to grow by over 7% per annum and, with a rapidly growing middle class, demand for Burberry’s goods is likely to continue to rise in the coming years. As such, now appears to be an excellent buying opportunity – especially since Burberry is geographically well-diversified and has a very appealing brand with a high level of cross-selling opportunity. As such, its P/E ratio of 17.8 indicates that there is considerable capital gain potential for long term investors.
Similarly, market research and polling company YouGov (LSE: YOU) also appears to offer good value for money. It is due to post a rise in earnings of 10% in the current financial year, which means that its shares trade on a price to earnings growth (PEG) ratio of only 1.4. And, while investor sentiment weakened after the inaccuracies experienced by the wider polling industry following the General Election in May, YouGov’s trading update released today shows that the company is performing well.
For example, it is experiencing strong growth in its key US market, while new ventures in Asia and France are also performing well. It continues to see opportunities for growth within its existing data products and services and appears to be well-positioned to continue the run which has seen its share price rise by 17% in the last year.
