Unilever (LSE: ULVR) shares jumped around 3% yesterday (8 February) following the release of the company’s full-year results.
Clearly, investors liked what they saw from the update. This has me wondering. Should I buy Unilever shares today?
The stock’s had a strong start to the year. It’s up 5%. However, the last 12 months have seen 2.3% shaved off its price after the business has battled with inflationary pressures. Could this be an entry point?
An overview
So, what is it that left the market impressed following the firm’s latest release?
In short, after seeing sales volumes fall in the first three quarters of 2023, Unilever has managed to turn that around. Sales volumes in Q4 rose 1.8%. As a result, total underlying sales growth come in at 7% for the year, above management’s 5% target. For its 30 Power Brands, which account for around 75% of revenue, this figure sat at 8.6%.
Of all its segments, Beauty & Wellbeing was the strongest performer. For the division, full-year underlying sales grew 8.3%.
More to like?
That’s positive news. But what does this say about Unilever?
In my opinion, it shows the defensive nature of the stock. It’s struggled with headwinds such as inflation. However, the products it provides are essential. That, to an extent, protects its bottom line.
There are also other factors I like about the stock. One is its cheap valuation. Currently, it trades on a price-to-earnings ratio of 14.5. I think that’s relatively priced. It’s also below its historical average of around 20.5.
To add to that, it offers a dividend yield of 3.7%. That’s in line with the FTSE 100 average. The firm also announced a new €1.5bn share buyback scheme set to commence in the second quarter. As a potential shareholder, these are the sorts of initiatives that I want to see.
Issues to consider
Of course, while the business provides essential products, there’s always the threat of cheaper alternatives. After all, we’re in a cost-of-living crisis. There are cheaper brands and own-brands available that consumers may decide to switch to. Unilever saw its market share shrink in the fourth quarter, which may be evidence of this.
However, with CEO Hein Schumacher highlighting that “competitiveness remains disappointing” and “overall performance needs to improve”, I’m confident the business will be heavily focused on addressing these issues. This fits more widely into its Growth Action Plan implemented in November last year which aims to speed up growth, increase productivity and simplicity across the business, and improve Unilever’s performance culture.
I’d buy
This is a stock that’s been on my watchlist for some time. And at its current price, I’m keen to buy some shares. With any spare cash I have this month, I plan to open a position.
Its defensive nature makes it a smart addition to my portfolio, I feel. As an investor who prioritises income, I’ll also be happy to make some extra cash on the side via its dividend.
