The Unilever share price hits a 5-year low. Is now the time to buy?

As the Unilever share price hits a multi-year low, is now the time for me to buy into this FTSE 100 giant?

| 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.

We learned just last week that, before Christmas, Unilever (LSE: ULVR) had tabled three separate bids for the consumer products arm of GlaxoSmithKline (LSE: GSK). The final takeover bid of £50bn was rejected by GSK on the basis that it “fundamentally undervalued” the business.

By Wednesday, Unilever had ruled out increasing its bid, arguing that it would not overpay for a business. Shareholders and the market were increasingly uneasy over the deal, seen in the plummeting share price. Together, these sealed the fate of what would have been one of the biggest takeovers in UK corporate history.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

The question is, does Unilever’s recent share price weakness provide a good entry point for a long-term investor like me?

Unilever’s shareholders revolt

Unilever, the owner of iconic brands such as Dove, Magnum, Ben & Jerry’s and Domestos, has been struggling for growth in recent years. Indeed, its share price is lower now than it was during the pandemic lows of March 2020. Little wonder that shareholder patience is beginning to run out. One prominent shareholder, Terry Smith, the outspoken fund manager of the £25bn Fundsmith equity fund, recently took a swipe. In his annual letter to shareholders, he accused management of losing “the plot”. He said it was more interested in displaying its “sustainability credentials” rather than “focusing on the fundamentals of the business”.

I believe one of the primary reasons Unilever bid for the consumer branch of GSK was to secure its own future. After all, it only recently fended off a takeover from US rival Kraft Heinz.

What I am trying to work out is whether the last few years of stagnant growth has been a mere blip or points to a deeper problem for Unilever. When Warren Buffett bought shares in struggling Coca-Cola in the 1980s, he did so believing its dominant brand and expert marketing would win through. In some respects, Unilever is in a similar position. It does, after all, own 14 of the top 50 brands by market penetration.

Alarm bells

However, when a company gives the impression that the only way it can grow is by acquiring another business, that sets off alarm bells for me. History books are littered with examples of large mergers and takeovers that failed to increase shareholder wealth. The hefty fall in Unilever’s share price following the takeover bid tells me that many shareholders doubted the deal would have been a good one.

Some analysts believed that GSK was holding out for £60bn. But the fact is that last year, GSK’s consumer business only generated revenues of £10bn. With a net-debt position of £18bn, a mostly-cash deal for GSK would have significantly swelled the debt on Unilever’s balance sheet and hastened the sale of slower-growing businesses. It is not clear at the moment how Unilever intends to grow its presence in the consumer healthcare space.

Unilever now needs to start winning back the trust of its shareholders and demonstrate that it can transform its fortunes. But just like turning a super tanker, transforming a giant takes time. For the moment, Unilever remains on my watchlist.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Andrew Mackie has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and 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

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

This cheap share fell 30% last week. I’d buy now

This huge US corporation saw its shares crash by 30% last week. But I'd buy this surprisingly cheap share now…

Read more »

Various denominations of notes in a pile
Investing Articles

These 7 shares produce passive income of 7% to 11% a year!

Passive income is extra money I make without working. By buying these seven shares, I could earn 8.9% a year…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

6.6%+ dividend yields! 2 FTSE 100 dividend stocks to buy

Finding the best dividend stocks to buy requires extra care today as soaring inflation takes a bite out of shareholder…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

At 85p, are Rolls-Royce shares a slam-dunk buy?

The Rolls-Royce share price is in penny stock territory. Roland Head explains why he thinks this FTSE 100 stalwart looks…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

‘Big Short’ investor Michael Burry is buying this quality growth stock! Should I?

In the first quarter, Michael Burry bought more of this growth stock. Is this a hint that I should also…

Read more »

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

Stock market crash: here’s why falling prices is good news

Over in the US, a stock market crash is battering high-priced stocks. But I see falling shares as an opportunity…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

These 5 FTSE 100 shares crashed in 2022. I’d buy 1 today

Although the FTSE 100 index is flat in 2022, some Footsie shares have crashed hard this year. But I see…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How investors can boost their passive income when the FTSE is falling

Stock markets are plagued with fears right now. Here's why I firmly believe those fears improve our passive income prospects.

Read more »