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3 To Research Right Now: Unilever plc, Intertek Group plc And Britvic Plc

stock exchangeThere’s nothing like a decent stock market correction to throw up value in quality companies.

After a steep correction, we often see stock markets claw their way back up again, which means share price falls can prove to be decent opportunities to buy.

A time for buying

Although we can never recognise a trend change until after it has happened, the share prices of many large companies rose over the last few days. There’s a good chance that stock markets are turning up.

Now seems like a good time to buy shares in those firms with the most promising business models and the slickest operations. Let’s revisit some of the London markets top-notch operators to see if all the recent scary headlines have knocked enough foam from valuations to justify a purchase.

Testing, inspection and certification services

Last year, shares in Intertek Group (LSE: ITRK), the testing, inspection and certification services company, traded over 3400p. Today, we can pick them up for 2580p each.

After several years growing earnings by double-digit percentages, the last year or two saw Intertek struggle to grow earnings. Yet the financial performance of the firm isn’t shabby:

Year to December

2009

2010

2011

2012

2013

Revenue (£m)

1,237

1,374

1,749

2,054

2,184

Net cash from operations (£m)

203

194

213

234

269

Adjusted earnings per share

83p

91p

109p

133p

140p

Dividend per share

25.5p

28.1p

33.7p

41p

46p

In August, the chief executive said the first half of the year saw Intertek deliver good growth in its product-related divisions, but headwinds in the firm’s minerals and energy-related businesses hampered progress. Nevertheless, a strong focus on profitability and cash flow produced overall margin improvement of 30 basis points, constant currency earnings-per-share progression of 8.6%, and a 20% increase in operating cash flow.

Intertek’s business remains strong and the directors are dumping some lower-value contracts to focus on high-margin work. There’s every reason to expect the firm to regain its earnings-growing mojo in the future. Weakness in growth now, seems like the catalyst for today’s value opportunity.

The shares trade on a forward P/E ratio around 17.5 for 2015 — the lowest valuation we’ve seen on the firm for some time.

Consumer goods

In this week’s third-quarter trading statement, Unilever  (LSE: ULVR) (NYSE: UL.US) reckons that underlying sales growth of 3.2%  is a competitive performance in markets that weakened further as macro-economic conditions put pressure on consumers.

I agree. Unilever seems to power its business forward whatever the economic weather. The cash flow generated from its mighty consumer brands makes a fine engine to drive progress. In early year 2000 the shares traded at about 800p; today they trade at 2468p, and the firm has always paid a growing dividend as well. Long-term performance like that is attractive, particularly if we plan to invest in a passive, buy-and-hold manner.

The shares are off from the peak of around 2900p they attained last year, but the valuation isn’t modest — quality businesses rarely sell cheap. The forward P/E rating for 2015 is around 17.5 for 2015, and the yield is running at about 3.9% for that year. City analysts expect forward earnings to cover the payout around 1.5 times.

To me, Unilever is a straightforward investment proposition — I’m likely to place my hands over my eyes and peep through my fingers when the valuation scares me, and buy the share-price dips.

Soft drinks

Leading branded soft drinks provider Britvic (LSE: BVIC) sells names like Robinsons, Tango, J2O, Fruit Shoot, Teisseire and MiWadi as well as PepsiCo brands such as Pepsi, 7UP and Mountain Dew Energy, which it produces in Britain and Ireland under an exclusive arrangement. 

The product is consumable with awesome repeat-purchase credentials. That’s the formula often replicated when we look at great buy-and-hold investments. Britvic’s trading record is a little patchy, but City analysts following the firm expect earnings to grow 14% this year and 13% during 2014:  

Year to September

2009

2010

2011

2012

2013

Revenue (£m)

979

1,139

1,290

1,256

1,322

Net cash from operations (£m)

131

125

125

132

142

Adjusted earnings per share

33.9p

36.5p

33.7p

27.2p

35.2p

The shares are down from the peak of 775p or so they achieved early on this year and, at today’s 648p, value the firm at a forward earnings’ multiple of just under 14 for 2015. Given the forward dividend yield, running at about 3.5%, and those tasty earnings’ projections, I think Britvic shares look alluring right now.

It’s often best to purchase the shares of top-notch companies such as Intertek Group, Unilever and Britvic when fear drives the stock market down. Being brave on down days can pay off along the line.

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Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has recommended Britvic and Intertek. The Motley Fool UK owns shares of Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.