Is the Unilever share price now worth a look?

The Unilever share price hasn’t turned many heads in the last few years, but is it potentially a hidden gem?

| More on:

Image source: Unilever plc

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.

Unilever (LSE:ULVR) , a prominent consumer goods company, owns a tremendous number of household names, including Ben & Jerrys, Vaseline, and Walls. The Unilever share price hasn’t exactly been keeping up with some of the biggest market movers, but could the company be a winner as economic uncertainty continues?

Unilever’s recent financial reports showcase a company in robust health. As of the end of 2022, total revenue stood at an impressive £60m, marking a consistent increase over the past four years. This demonstrates the capacity to grow and expand in a challenging economic environment.

According to a discounted cash flow calculation, which calculates an approximation of fair price, Unilever is currently trading at 15.7% below its estimated fair value. I also like to consider the price-to-earnings (P/E) ratio. Unilever has a P/E of 13.6 times, which is notably lower than rivals in the sector.

These strong metrics are further supported by the company’s earnings growth of 42% over the past year, a strong indicator of financial health and potential for future growth​.

Despite a fairly healthy-looking balance sheet, there is still a couple of red flags for me. At £29bn, and with a debt-to-equity ratio of 105%, it’s clear that the company is fairly reliant on debt. However, with cash reserves and long-term assets outweighing this, it seems manageable, despite the high interest rate environment we’re currently in.

Slow and steady

Unilever’s share price reflects the company’s steady, if not spectacular, market performance. Currently priced at £39.49, the company has seen a 0.24% increase over the past year. However, it’s worth noting the 16.85% decline over the past three years, indicating some volatility and market challenges​​.

In terms of risks, Unilever’s earnings are forecast to decline by an average of 1.7% per year for the next three years. This, coupled with an unstable dividend track record and a high level of debt, suggests that potential investors should be cautious and consider these factors.

However, in a time of economic uncertainty, Unilever has been proactive in adapting to market trends and making smart strategic decisions.

Making the right decisions

Unilever has reaffirmed its earnings guidance for the next year. This indicates confidence in the operational strategy and future prospects. This is further bolstered by the decision to sell the Dollar Shave Club, a move that could potentially streamline operations and focus on more profitable segments​​.

In an effort to continually improve governance and the overall strategic direction, Unilever has announced changes to its board committee composition. Such changes often reflect a company’s adaptability and willingness to evolve in response to internal and external challenges​​.

Am I buying?

Unilever presents a mixed bag of strong financial performance, market challenges, and strategic initiatives. While growing revenue and the potentially undervalued share price is encouraging, the forecasted decline in earnings and high debt level pose challenges. Nevertheless, Unilever’s recent strategic decisions, including dividend payouts and the sale of non-core assets, showcase a company that is actively managing its portfolio and seeking to create value for its shareholders. I’ll be keeping a close eye on how these strategies unfold, and adding Unilever to my watchlist for now.

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.

Gordon Best has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever Plc. 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

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Why the FTSE 250 looks an incredible bargain

While all the attention is on the elite FTSE 100, the mid-cap FTSE 250 index looks unbelievably cheap. I don't…

Read more »

2024 year number handwritten on a sandy beach at sunrise
Investing Articles

Here’s my plan to make the most of juicy UK shares ahead of 2024 and beyond!

Our writer reckons there hasn't been a better time to snap up quality UK shares. She explains how she's planning…

Read more »

Young Black woman using a debit card at an ATM to withdraw money
Investing Articles

Here’s how many Lloyds shares I’d need to buy for a £100 monthly income!

Offering a higher dividend yield than the average across FTSE 100 stocks, are Lloyds shares worth buying for passive income…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Up 27% in 2023, what next for the Tesco share price in 2024?

The Tesco share price has had a great 2023, rising 27% while the FTSE 100 was flat. But what might…

Read more »

Hand is turning a dice and changes the direction of an arrow symbolizing that the value of an ETF (Exchange Traded Fund) is going up (or vice versa)
Investing Articles

FTSE 250? No, I’d buy this index fund instead

Investing in index funds can be a profitable enterprise. Our author has been exploring the different options to determine the…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

This 4% yielding FTSE 100 giant is dirt-cheap and perfect for passive income!

Looking for a mammoth business with shares trading at discount levels and offering an excellent passive income opportunity? Our writer…

Read more »

UK money in a Jar on a background
Investing Articles

Here’s how I’d use dividend shares to try and turn £5,000 of savings into passive income of £900 a year

With dividend shares at today’s prices, Stephen Wright thinks there are two ways to turn a £5,000 investment into something…

Read more »

Investing Articles

After a recovery that Lazarus would have been proud of, is the easyJet share price worth a look?

With its dividend restored and its balance sheet repaired, the easyJet share price looks like a bargain. But Stephen Wright…

Read more »