Why Unilever plc, Reckitt Benckiser Group Plc And Burberry Group plc Are On Track To Rise By 36%+ This Year

These 3 consumer stocks are on the up: Unilever plc (LON: ULVR), Reckitt Benckiser Group Plc (LON: RB) and Burberry Group plc (LON: BRBY).

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While the FTSE 100 may be in the red since the turn of the year, Burberry (LSE: BRBY) is up by 8%. Assuming it continues to deliver such impressive share price growth throughout the remainder of the year, it could deliver a total capital gain of 36% for the full year.

Clearly, there’s a long way to go before such a return is achieved, but Burberry appears to be gaining momentum after a challenging period for the luxury fashion brand. Weakness in China caused its forecasts to be slashed in recent months and this translated into weakening investor sentiment. However, with Burberry having such a resilient brand that’s geographically well-diversified, it appears to be a strong long-term buy.

Furthermore, with Burberry having the potential to further improve its pricing and also diversify its product range, now seems to be an excellent time to buy it. With the company forecast to increase its bottom line by 8% next year, investor sentiment could continue to improve through the remainder of 2016 and beyond.

Consumer goods stars

Also rising by over 8% since the turn of the year is Reckitt Benckiser (LSE: RB). It has benefitted from a better than expected financial performance that has seemingly convinced the market it’s worthy of an even higher valuation. In fact, Reckitt Benckiser now trades on a price to earnings (P/E) ratio of 24.9, which is considerably higher than the vast majority of its FTSE 100 peers.

Although the scope for an increased rating may be more limited compared to its index peers, Reckitt Benckiser has exceptional long-term earnings growth prospects. For example, its bottom line is forecast to rise by 8% next year and in the coming years the increasing wealth of the emerging world is likely to translate into rising demand for the company’s consumer products. And with its sales and profitability being relatively stable, Reckitt Benckiser remains a relatively sound defensive play. This could make it an even more popular choice if the volatility of recent months continues.

Meanwhile, Unilever (LSE: ULVR) has risen by 9% since the turn of the year. This means that if such a rate of growth continues throughout the remainder of the year, Unilever’s share price could be 41% higher at the end of 2016 than it was at the start.

While such a rapid rate of return may seem rather excessive, Unilever appears to offer good value for money when compared to a number of its consumer goods peers. For example, it trades on a P/E ratio of 22.1 (versus 24.9 for Reckitt Benckiser) and with its bottom line due to rise by 7% next year, it continues to offer reliable growth prospects.

In addition, Unilever remains a sound income play. It currently yields 3% and with dividends being covered 1.5 times by profit and therefore having the scope to rapidly rise in the coming years, Unilever’s total return could prove to be extremely impressive over the long run.

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 of and has recommended Unilever. The Motley Fool UK 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.

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