Does Unilever plc Provide Decent Value For Money?

In this article I am looking at whether Unilever (LSE: ULVR) (NYSE: UL.US) offers investors appetising value for money.

Price to Earnings (P/E) Ratio

Concerns over slowing sales in critical emerging markets has hampered the steady ascent in Unilever’s share price punched in Unileverrecent years. Improved market sentiment has given the firm fresh legs over the past couple of months, however, and based on current City projections, Unilever currently changes hands on a P/E rating of 20.4 for 2014, but which slips to 18.8 for next year.

These figures exceed of the benchmark of 15 or below — territory which is generally classified as reasonable value — while it also looks expensive when tallied up against a forward average of 17.2 for the FTSE 100.

Price to Earnings to Growth (PEG) Ratio

Unilever has seen earnings fail to gain traction in recent years, and has seen earnings slip in two of the past five years. And City analysts expect a fractional decline in the current 12-month period before solid 8% rebound is punched next year.

This year’s forecasted earnings slip results in an invalid PEG rating, although 2015’s positive reading creates a multiple of 2.2. Although hardly a catastrophic readout, next year’s figure falls outside the bargain territory of 1 or below.

Market to Book Ratio

Once total liabilities are subtracted from total assets, Unilever’s book value is revealed at £12 billion. This leaves the company with a book value per share of £4.11 per share, in turn creating a stratospheric market to book value of 6.5 — a value of 1 or below is widely considered as representing stellar value.

Dividend Yield

Unilever has made a point of keeping dividends rolling consistently higher in recent times, and City analysts expect the household goods giant to continue delivering annual growth during the next two years at least. Indeed, the business is anticipated to lift 2013’s payout of 109.49 euro cents per share to 113.6 cents this year and to 121.2 cents in 2015.

These projections create yields of 3.4% and 3.7% correspondingly. These figures cannot be considered heartstoppers, even though they take out a forward average of 3.2% for the FTSE 100.

Mediocre Medium Term Forecasts Conceal Perky Prospects Further Out

In my opinion, Unilever does not offer particularly head-turning shareholder value through to the end of next year, with readings on both a growth and income basis failing to whet my appetite at least.

However, for long-term investors I believe that the company’s expanding exposure across bubbly developing markets, helped by its portfolio of leading brands from Dove soap to Persil detergent, makes it a terrific bet for long-term earnings and dividend expansion. Indeed, I believe Unilever’s elevated market to book ratio factors in the excellent opportunities on offer to the firm.

Manufacture a mint with the Fool

But regardless of whether you fancy taking the plunge with Unilever, I strongly recommend you check out this BRAND NEW and EXCLUSIVE report which reveals half a dozen mega growth stocks as selected by our in-house investment guru Maynard Paton.

This special wealth report -- "The Motley Fool’s Top Growth Stock For 2014" -- picks out a host of stock market stars on both sides of the Atlantic set to pay off handsomely now and in the future. Click here to download your copy now; it's 100% free and comes with no further obligation.

> Royston does not own shares in Unilever. The Motley Fool owns shares in Unilever.