The Unilever (ULVR) share price has jumped. I’d buy now!

The Unilever plc (LON:ULVR) share price has underperformed over the last year, but Paul Summers thinks the stock represents great value.

| 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.

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.

The Unilever (LSE: ULVR) share price was firmly on the front foot this morning after the consumer goods giant revealed an encouraging update on trading over the first quarter of 2021. Let’s check those numbers.

“A good start to the year”

Perhaps the most important point from today’s statement was the 5.7% underlying sales growth reported by the FTSE 100 member. This is positive as Unilever had previously reported fairly sluggish trading over the pandemic, despite virtually all of us being stuck at home.  

On a geographical level, sales in the Emerging markets rose 9.4% over the three months to the end of March. That’s not surprising when you consider that many countries in this region were in lockdown over the same period in 2020.

Sales growth in developed markets was more depressed with growth in North America being held back by Europe. Strong demand for food was offset by lower sales of personal goods products. Even so, the firm’s e-commerce operations reported sales growth of 66%.

Commenting on today’s numbers, CEO Alan Jope said that the company had made “a good start to the year.” He went on to say that the “operational separation” of the firm’s tea business was progressing, although the actual form this takes (IPO, demerger or sale) is still to be decided. Unilever has also creating a new unit (Elida Beauty). This houses its smaller personal care brands, such as Q-Tips and Impulse, that could also be put on the block.  

Following hot on the heels of FTSE 100 oiler BP, Unilever revealed that it would kick off a €3bn share buyback programme in May. This will be completed by the end of 2021. 

I’m bullish on the Unilever share price

The Unilever share price is now barely 3% higher from where it was a year ago. For perspective, the FTSE 100 index has climbed 14% over the same time period.

Despite this lacklustre performance, I see the Marmite-owner as a quality, defensive pick. Like UK fund managers Terry Smith and Nick Train, I’m drawn to its consistently solid margins and returns on capital. These are what I look for as a long-term investor. They help to explain why the Unilever share price is up 38% over the last five years. The FTSE 100 is up 12%. 

The outlook is also positive. The firm is targeting underlying sales growth of 3-5% in 2021. This number is likely to be at the top end over H1. 

This isn’t to say that Unilever has turned the corner just yet. The company reflected that its operating environment “remains volatile” due to COVID-19 and the impact of sporadic lockdowns across the world on shopper behaviour.

The huge rise in coronavirus infection in India over recent weeks means investors should not assume that today’s positive momentum in the Unilever share price will necessarily hold in the near term. To be clear, no investment is devoid of risk. Even so, I think this is already priced in for Unilever. 

Stay diversified

Trading at 19 times forecast earnings before markets opened, I think this company represents great value right now. The share price won’t explode in the same way that some small-cap stocks have recently. However, it offers that strong foundation many investors probably look for. 

So, while I’d maintain a sufficiently diversified portfolio as a precaution, I’d have no issue with buying the stock today.

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.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 Warren Buffett stock I’m buying now

Coca-Cola is the fourth-largest holding in Warren Buffett’s Berkshire Hathaway. I’ll explain why I’m following Buffett and buying more.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

Harvey Jones thought he was bagging a FTSE 100 bargain when he bought Lloyds shares on two occasions last year.…

Read more »

Young woman holding up three fingers
Investing Articles

I’m itching to buy these 3 hidden FTSE gems in a Stocks and Shares ISA

Harvey Jones is keen to add these three FTSE 100 companies to his Stocks and Shares ISA before April. Only…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

How I’d try and turn just £1 a day into a fabulous £54,485 passive income for life

By investing small, regular sums in FTSE 100 shares I can potentially generate a huge passive income stream. It won't…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’d aim for a million buying under a dozen shares

Christopher Ruane explains why less could be more when it comes to building a share portfolio if he wants to…

Read more »

Investing Articles

Rolls-Royce shares are up over 1,000% since 2020! Am I too late to buy?

Rolls-Royce shares now cost over tenfold what they did in the firm's 2020 rights issue. Our writer thinks they may…

Read more »

Investing Articles

1 top UK growth stock for my tech portfolio in 2024

Up 30% in just one year, this growth stock looks positioned to continue on the path of substantial gains, according…

Read more »

Buffett at the BRK AGM
Investing Articles

I’d follow Warren Buffett to target effortless passive income

Warren Buffett knows a thing or two about building passive income streams. By learning from the Sage of Omaha, so…

Read more »