The Unilever share price: after an 11% leap, am I too late to buy?

The Unilever share price first slumped and then jumped after it abandoned a £50bn deal. Have I missed my chance to buy Unilever shares on the cheap?

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In the US, investors are worried about a substantial stock market crash. Meanwhile, UK stocks have held up pretty well so far in 2022. In fact, the FTSE 100 index has gained more than 105 points (+1.4%) since 31 December. Perhaps because the Footsie is unloved and undervalued, as I’ve repeatedly argued throughout 2020-21? Indeed, I still view many FTSE 100 stocks as firmly in bargain-bin territory. That’s why I’ve kept a close eye on the Unilever (LSE: ULVR) share price, which has been on a roller-coaster ride since mid-January.

The Unilever share price drops and then pops

The Unilever share price has recorded only modest gains over the past five years. Here’s how this popular stock has performed from 2016 to 2021 (excluding dividends):

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  Closing price

Yearly change

2021 3,945.5p -10.2%
2020 4,392.0p 1.0%
2019 4,350.5p 5.9%
2018 4,108.5p -0.4%
2017 4,125.5p 25.3%
2016 3,292.5p N/A

The Unilever share price had a great 2017, soaring by more than a quarter (+25.3%). Alas, it failed to hit the heights over the next four years, falling by 0.4% in 2018 and losing more than a tenth (-10.2%) last year. Hardly the returns one might hope for from a widely admired, quality business, right?

As I write, the Unilever share price stands at 3,833.72p, down 102.28p (-2.6%) on Tuesday’s close. At this level, the consumer-goods giant is valued at a mighty £97.9bn, making it the third-largest company in the FTSE 100 index. This also leaves it down 111.78p (-2.8%) so far this calendar year.

However, following a failed £50bn bid for GlaxoSmithKline‘s Consumer Health arm (GSKCH), Unilever shares went into a tailspin. After closing at 3,936.5p on 14 January, the Unilever share price plunged as low as 3,450p on Friday morning (19 January), before rebounding strongly this week. Indeed, since Friday’s low, ULVR has leapt by a ninth (+11.1%) in under four days.

Did I miss buying Unilever on the cheap?

Last week, both Unilever’s share price and its management took a battering from major shareholders and financial pundits. Many criticised Unilever chief executive Alan Jope and chief financial officer Graeme Pitkethly for what they saw as an imprudent and over-priced bid for GSKCH. There were even calls for change at the very top of Unilever’s management team.

As the Unilever share price slid, I decided that it was high time to ‘press the button’ to add Unilever stock to my family portfolio. Unfortunately, I then fell ill (but not with Covid-19), missing my chance to buy at what I considered to be a bargain price below £35. Rats!

So my big question now is: have I missed out buying while the Unilever share price still offers value? At their current level, Unilever shares trade on a price-to-earnings ratio of 22.2 and an earnings yield of 4.5%. The dividend yield — almost 4.3% a year at Friday’s low point — now stands at nearly 3.9%. That’s broadly in line with the FTSE 100’s dividend yield of around 4% a year.

Although these fundamentals are not as attractive as they were on Friday, they’re good enough for me. Hence, my wife — the portfolio administrator — will shortly add ULVR to our holdings. We’ll see how this beaten-down stock will get on over the next five to 10 years. However, Unilever and its share price faces several high hurdles. Famed activist investor Nelson Peltz has built up an undisclosed stake in the group. Unilever announced 1,500 job cuts this week. And more restructuring news follows in February. Hence, let’s see what happens next…

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Cliffdarcy owns shares of GlaxoSmithKline. 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.

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