Is Now The Perfect Time To Buy Unilever plc, Burberry Group plc And A.G. Barr plc?

Are these 3 consumer stocks ripe for investment? Unilever plc (LON: ULVR), Burberry Group plc (LON: BRBY) and A.G. Barr plc (LON: BAG)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in beverages company Barr (LSE: BAG) have fallen by over 5% today due to a profit warning. The seller of brands such as Panda and Irn-Bru has experienced a challenging first half of the year, with poor weather, tough trading conditions and a strong comparator from last year causing its bottom line to disappoint during the period.

In fact, its pre-tax profit declined from £19m in the first half of 2014 to £17m in the first half of the current year, with revenue also down from £135m to £130m. As a result, it now expects profit for the full-year to be at a similar level to last year, which is below previous market expectations of a 6% rise. And, with price deflation being a very real threat to the soft drinks market in the near term, it looks as though AG Barr will continue to struggle in the short run.

Despite its shares falling by over 5% today, Barr still trades on a relatively rich valuation. For example, it has a price to earnings (P/E) ratio of 18.8 which, for a business that is not due to post a rise in its earnings this year, seems rather high. And, while bottom line growth of 6% is forecast for next year, the challenging trading conditions being encountered are showing little sign of abating, which means that the company’s share price could come under pressure in the months ahead.

Also enduring a challenging period is Unilever (LSE: ULVR). The slowdown in China’s growth rate is a cause for concern and, as a result, its forecasts for the full year have been revised down somewhat. The company is now expected to post a rise in earnings of 10% this year and 6% for next year – both of which are impressive numbers given the uncertain outlook for the global economy.

Clearly, there is scope for downward revisions and, like Barr, Unilever trades on a rather high P/E ratio of 19.7. But, unlike Barr, Unilever has a huge portfolio of major brands which command vast levels of customer loyalty. Furthermore, it is extremely well-diversified in terms of its regional exposure. As such, and while its shares may dip in the months ahead, Unilever remains a superb long term buy.

Similarly, Burberry (LSE: BRBY) is in a similar position to Unilever regarding the slowdown in China. However, Burberry is also a well-diversified business in terms of its geographical exposure and in recent years has become a true lifestyle brand. This has allowed it to extend its price point upwards and become a more resilient and stronger brand through appealing to men and women across a wide range of product categories.

Looking ahead, Burberry is expected to increase its earnings by 10% next year, which puts it on a price to earnings growth (PEG) ratio of just 1.6. This indicates that its shares have considerable upside and, in the long run, it seems likely to perform relatively well.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Burberry and Unilever. The Motley Fool UK owns shares in Unilever and has recommended Burberry. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »