Are Unilever plc, Supergroup plc and Ted Baker plc running out of steam?

Should these 3 consumer stocks be avoided? Unilever plc (LON: ULVR), Supergroup plc (LON: SGP) and Ted Baker plc (LON: TED).

| 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.

While the FTSE 100 has endured a rather disappointing month after falling 1.5%, Unilever (LSE: ULVR) has performed twice as badly. Its shares are down 3% during the same period and this could cause a number of investors to become nervous about its future prospects. After all, China is a key market for Unilever and with its GDP growth rate falling to its lowest level for a number of years, the company’s outlook could be rather uncertain.

Despite its recent fall, Unilever doesn’t appear to be running out of steam. That’s partly because China still offers a superb opportunity for consumer goods companies, with an ever-expanding middle class likely to demand higher volumes of a variety of such goods. It’s also because Unilever is extremely well-diversified both geographically and in terms of the products it sells, which means that even weakness in one region may not significantly dim its long-term growth potential.

With Unilever forecast to grow its bottom line by 8% in each of the next two years, it appears to offer upbeat growth prospects in the short-to-medium term. When combined with its long-term prospects, this should be sufficient to push its shares higher and allow it to beat the wider index.

Out of fashion

Also recording disappointing share price performance of late has been Ted Baker (LSE: TED). Its shares have fallen by 11% in the last month and as with Unilever, China is set to become an increasingly important market for the premium clothing seller. As with Unilever, this should allow Ted Baker to achieve above average growth rates over the medium-to-long term and with the company’s bottom line due to rise by 10% this year and by a further 14% next year, it appears to be performing well.

Despite such strong growth prospects, Ted Baker trades on a very appealing price-t0-earnings-growth (PEG) ratio of 1.3. This indicates that it offers growth at a reasonable price and with earnings growth being in the double-digits in each of the last five years, Ted Baker seems to be a reliable stock to hold with a wide margin of safety.

Meanwhile, shares in Supergroup (LSE: SGP) have slumped by 8% in the last month and as with Unilever and Ted Baker, this could lead investors to conclude that the company has run out of steam. However, with the changes made by management likely to bear fruit in the coming years, now could be a good time to buy a slice of the high street group.

Notably, Supergroup now has a more efficient supply chain and its logistics have been improved. This should help contribute to a rising bottom line in future years, with Supergroup’s earnings due to rise by 15% in the current year, followed by further growth of 12% next year. And with it trading on a PEG ratio of just 1.1, Supergroup could prove to be a profitable buy in the medium-to-long term.

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 Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Supergroup. 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

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

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 »