Reckitt Benckiser Group Plc’s 2 Greatest Strengths

When I think of health, hygiene and home consumer products company Reckitt Benckiser (LSE: RB), two factors jump out at me as the firm’s greatest strengths and top the list of what makes the company  attractive as an investment proposition.

1) Brand-driven growth

There’s nothing to argue about over Reckitt Benckiser’s record on growth; the firm has been growing revenue, cash flow and earnings:

Year to December 2009 2010 2011 2012 2013
Revenue (£m) 7,753 8,453 9,485 9,567 10,043
Net cash from operations (£m) 1,948 1,544 1,740 1,888 2,121
Adjusted earnings per share 198.9p 229.4p 249.9p 267.6p 273.8p
Dividend per share 100p 115p 125p 134p 137p

We can see the strength of Reckitt’s business in its ‘power’ brands, names such as Dettol, Harpic, Durex, Strepsils, Gaviscon, Vanish, Cillit Bang and Calgon. Such consumer favourites generate brand loyalty from customers and have strong repeat-purchase credentials.

In a recent update for the firm’s first quarter of the year, like-for-like revenue is up 8% in Latin America and the Asia Pacific region, which delivers about 28% of Reckitt’s core net revenue. In Russia, the Middle East and Africa, revenues are up 4%, representing 14% of overall income. In the firm’s biggest trading region, Europe and North America, sales are up 2%, and deliver 58% of core revenue.  That all nets out to 4% overall revenue growth, which is a good start to the year auguring well for another good result for 2014 as a whole.

reckitt.benckiser 2) Sector diversification

Reckitt’s consumer products span several market sectors, a situation which provides attractive diversification. Last year, 43% of core net revenue came from Hygene products, 29% from Health, 6% from Home and the rest from other markets.

However, the firm’s operations are not just attractive to stock market investors. In recent news, Reckitt announced that it is in discussions with Merck regarding an offer for its consumer health business.

What now?

Reckitt Benckiser’s forward dividend yield is running at around 3% for 2015 and the forward P/E ratio is about 18. City analysts expect earnings to grow about 5% that year, so the shares look a little pricey.

So, I'm also looking at a share idea for capital gains from one of the Motley Fool's top small-cap investors. His diligent research has uncovered what looks like one of the best growth shares for 2014.

A strong recovery in profits followed restructuring at this firm, and the directors predict double-digit margins driving a profits surge in the years to come.

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Kevin does not own any Reckitt Benckiser shares.