A conglomerate specialising in beauty, foods and household products, Unilever (LSE:ULVR) operates all over the globe. It owns a number of well-known brands, like Vaseline, Dove and Persil. And in the past week, the Unilever share price has risen over 4%. It currently trades at just above 3,500p, although that’s down 13.5% in the past year.
I want to understand the reasons for this price movement. And should I add this stock to my portfolio as part of a long-term buy-and-hold strategy? Let’s take a closer look.
Historical results and the Unilever share price
As a mature company, Unilever’s historical results have been pretty consistent. Between 2017 and 2021, revenue declined slightly from €53.7bn to €52.4bn. However, profit before tax increased from €8.1bn to €8.5bn.
In addition, earnings-per-share (EPS) grew from ¢224 to ¢262. By my calculations, this means the business has a compound annual EPS growth rate of 3.2%. Although this is not heart-stopping growth, it is nevertheless consistent.
It should be noted, however, that past performance is not necessarily indicative of future performance.
Results during 2020, when the Covid-19 pandemic was at its worst, were hardly terrible either. Profit before tax fell to €7.9bn, for example. It is encouraging, however, to see that Unilever’s results have rebounded swiftly.
Recent results and upside potential
In a recent trading update for the three months to 31 December, the company reported sales growth of 4.9% year on year, and initiated a share buyback scheme for the next two years.
These schemes are usually an indicator of a healthy business, because they seek to return cash to shareholders.
Furthermore, RBC increased its price target for the company from 3,400p to 3,600p in February, arguing that results appeared to be stronger again after the pandemic.
Despite this, Unilever has warned about shrinking underlying operating margins and higher costs. It also ruled out any mergers and acquisitions in the near future. But I view these issues as fundamentally short term in nature and I think they may subside over the long term.
Change on the horizon?
The company hit headlines in January when it offered £50bn for the consumer healthcare segment of GlaxoSmithKline. This bid ultimately failed and the GSK segment is due to float in its own right in July after a demerger.
Also in January, activist hedge fund Trian Partners increased its stake in Unilever. A decision to axe around 1,500 manager-level roles soon followed and more administrative changes may be announced soon.
Although change may be on the horizon, I still believe that this industry giant will probably continue to record consistent returns for its shareholders.
Overall, Unilever’s historical results speak for themselves. At a current price of 3,500p, I think there may be especially strong upside potential after the recent company trading update.
Although there are risks going forward, I do not view these as long-term threats and think they will likely subside with time. The Unilever share price really could be a ‘no-brainer’ buy at current levels and I will be buying shares soon.
