A key strength of Unilever (LSE: ULVR) (NYSE: UL.US) is its diversity. In fact, it offers a wide range products, from personal care products to food, and it tends to focus on the mid-price point space. This should be beneficial for the company over the medium to long term, since its geographical diversity is likely to enable it to benefit from an increasingly wealthy middle class across the developing world, from where Unilever generates around 60% of its total annual sales.
Certainly, Unilever is not a cheap stock, as evidenced by its price to earnings (P/E) ratio of 21.2 versus 16 for the FTSE 100. However, with such superb long term growth potential and the stability and robust earnings numbers that it brings, Unilever continues to be a stunning global consumer play.
One of the most fascinating companies in the fashion space is Burberry (LSE: BRBY). That’s because it has transformed itself from a one-trick pony to a business that is becoming a lifestyle brand fit to take on the likes of Luis Vuitton. In fact, as recently as ten years ago, Burberry was known only for its trench coat and check, the design of which had become less popular and somewhat devalued.
Today, though, Burberry has multiple products across the menswear and womenswear range and, unlike its closest rival, Mulberry, has been able to successfully increase prices in recent years so as to improve margins and retain its exclusivity; the loss of which had been a key reason for the Burberry check’s decline. Looking ahead, Burberry still has scope to expand into new product areas and, with an excellent management team, looks good value while it trades on a P/E ratio of 20.8.
A key market for Diageo (LSE: DGE) is China and, due to the country experiencing an economic slowdown in recent months, Diageo’s sales and profitability have suffered. For example, the company’s bottom line fell by 7% last year and is expected to decline by a further 6% in the current year.
Looking ahead, though, things could be about to change. That’s because China is in the midst of an attempt to stimulate its economy through interest rate cuts and, over the medium term, this could improve Diageo’s outlook. And, with the company still being relatively defensive and less volatile than the wider index – as evidenced by its beta of 0.9, it could be worth buying while it trades at a discount to its global consumer peers, with Diageo having a P/E ratio of 19.5.
British American Tobacco
Earnings growth at British American Tobacco (LSE: BATS) has been somewhat disappointing in recent years. For example, last year the company’s bottom line fell by 4% and it is only expected to rise by 1% in the current year. A key reason for this is, of course, falling cigarette volumes, with a mix of increased regulations and a rise in illegal cigarettes contributing to an industry-wide decline in cigarettes smoked across the globe.
Despite this, British American Tobacco’s key brands have been relatively robust and, looking ahead to next year, the company is expected to increase its net profit by 8%, which is roughly in-line with the growth rate of the wider index. And, with a P/E ratio of just 16.8, it compares very favourably to its global consumer peers, which makes British American Tobacco the pick of the very appealing bunch of stocks discussed here.
Peter Stephens owns shares of British American Tobacco and Unilever. The Motley Fool UK has recommended Burberry. 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.