IS UNILEVER A BUY? | UNILEVER SHARE PRICE – RELATIVE VALUATION (ULVR)
In this post, we look at the Unilever stock price and its relative valuation to understand; is Unilever is a buy based on the share price vs similar companies. We will also look at what the analysts are saying and if they believe Unilever is a good investment.
If you are interested in seeing our view of Unilever’s fair value / intrinsic value, see our post reviewing Unilever’s fundamentals and DCF model.
Table of Contents
- Analysts Targets
- Comparable Analysis – Equity Valuations
- Comparable Analysis – Enterprise Valuations
- Unilever Historical Valuation Multiples
Unilever Company Overview
Unilever Company Description
Unilever is a diversified personal product, home care, and packaged food company. Its brands include Knorr soups and sauces, Hellmann’s mayonnaise, Lipton teas, Axe and Dove skin products, and the TRESemme haircare brand.
The firm has been acquisitive in recent years; high-profile purchases include the mail-order men’s grooming business Dollar Shave Club and Seventh Generation cleaning and personal-care products.
|Current Share Price (m)||£35.23||Revenue (m)||£44,053|
|Shares Outstanding (m)||2,610||EBITDA (m)||£9,575|
|Market Cap (m)||£91,936||EBITDA Margin||22%|
|Total Debt (m)||£24,924||Debt / EBITDA||2.6x|
|Enterprise Value (m)||£113,085||P/E (YE)||16.5|
Unilever Revenue Breakdown – Region
Unilever Revenue Breakdown – Product
|Beauty & Personal Care||£18,397||41.8%|
|Food & Refreshment||£16,776||38.1%|
Unilever Share Price History
|Current Price:||£35.23||52 WK Low:||£33.28||52 WK High:||£43.60|
Unilever Shareholder Ownership
|The Vanguard Group||111,550,911||6.2%|
|Legal & General Invest.||48,455,690||2.7%|
|Lindsell Train Limited||43,452,854||2.4%|
|State Street Global.||37,570,338||2.1%|
|Merrill Lynch & Co.||31,650,087||1.8%|
|Flossbach von Storch AG||24,345,000||1.4%|
|Fidelity International Ltd||21,652,934||1.2%|
|UBS Asset Management||19,523,841||1.1%|
Unilever Valuation Review
Analysts‘ View of Unilever
Unilever Price Target – Analysts’ Price Targets
|Analyst Name||Firm||Position||Price Target||Action|
|Celine Pannuti CFA||J.P. Morgan||Sell||–||Reiterated|
|James Edwardes Jones||RBC Capital||Hold||£32||Reiterated|
|Eileen Khoo||Morgan Stanley||Hold||£38||Reiterated|
|Eamonn Ferry||Credit Suisse||Buy||£46||Maintained|
|John Ennis CFA||Goldman Sachs||Hold||£40||Maintained|
|James Targett||Berenberg Bank||Hold||£37||Reiterated|
|Tom Sykes||Deutsche Bank||Hold||£46||Maintained|
|David Hayes||Societe Generale||Buy||£41||Upgraded|
|Unknown Analyst||Canaccord Genuity||Buy||£40||Reiterated|
|Chris Pitcher||Redburn Partners||Hold||–||Upgraded|
The average analysts’ price target is £39, which is above the stock’s current price. The highest price target is £46, and the lowest is £32.
Analysts’ Consensus – Is Unilever a Buy?
Analysts’ Recent Actions for Unilever Stock
31% of analysts rate Unilever as a buy, and 56% of analysts rate the stock a hold. There are still 13% with a rating of sell. There have been no downgrades to the stock; alternatively, 19% of analysts have upgraded their view. 81% have either reiterated or maintained their position.
Unilever Comparable Analysis
Caution should be taken as no two companies are precisely the same. Companies can be at different stages of maturity, have different operating segments, operate in different geographical regions etc. Best efforts have been made to use similar companies in the below analysis.
Companies used in determining the comp values are as follows:
GlaxoSmithKline, Johnson & Johnson, Kimberly Clark, L’Oreal, Nestlé and Procter & Gamble.
Unilever Relative Valuation – Equity Valuations
Unilever P/E – Price to Earnings vs Competitors
Unilever has a P/E ratio of 16.1x, which is lower than the average of this sample, with only GlaxoSmithKline having a lower P/E ratio. Forecasted P/E is again lower than the competition at 17.4x; GlaxoSmithKline is again lower, as is Johnson & Johnson at 17.3x.
Unilever P/S – Price to Sales vs Competitors
Unilever’s P/S multiple is also lower than all the competitors at 2.1x and considerably lower than the majority. GlaxoSmithKline is again lower than most, along with Kimberly Clark. Conversely, L’Oreal is significantly higher than the others at 6.4x.
Unilever P/FCF – Price to Free Cash Flow vs Competitors
Similar to P/E and P/S, P/FCF is lower than all the competitors at 18.3x. However, L’Oreal and Nestlé are significantly higher than the rest. Unilever is the only company with a forecasted P/FCF that is higher than the current ratio, increasing from 18.3x to 18.5x. All other companies reduce, but only GlaxoSmithKline has a forecasted P/FCF lower than Unilever.
Unilever Relative Valuation – Enterprise Valuations
Unilever EV/EBITDA vs Competitors
Unilever’s EV/EBITDA at 11.6x is lower than the average and the lowest of all those compared. L’Oreal continues to be at the top end of the scale.
Unilever’s EV/Sales at 2.6x is again lower than the average and the majority of the competitors. Kimberly Clark has an EV/Sales also at 2.6x. L’Oreal once again has the highest ratio.
Unilever Valuation Comps Analysis
To understand the relative value of Unilever, we can use the average multiples from Unilever and its competitors. The below table shows you these calculations. Unilever reports its annual financial statements in euros, so the valuations below are shown in euros. The euro share price from the analysis has then been converted to pounds sterling in the last column to reflect the trading currency.
You can see from this table, using the relative valuations, that Unilever’s share price ranges from £52.31 using the P/E multiple to £71.64 if we use the P/FCF multiple. So all are significantly higher than the current share price.
|Metric||Comps||Enterprise Value||Net Debt||Equity Value||Shares||Share Price||Share Price|
Unilever Valuation Multiples vs Historical
Unilever’s current EV/EBITDA multiple at 11.6x is lower than the 10-year average of 12.5x. 11.6x is equal to 2015, with only 2013 being lower in the last ten years.
Unilever’s 2021 EV/Sales at 2.6x is narrowly higher than the ten year average of 2.5x. 2.5x is the lowest of the last five years; however, 2012 – 2016 were all lower, with 2012 the lowest at 1.9x.
Unilever P/E – Price/Earnings Multiple
2021 P/E ratio at 16.1x is considerably lower than the ten year average of 19.6x. It is also the lowest value in the previous ten years. The highest P/E ratio was in 2015 at 21.8x.
Unilever P/S – Price/Sales Multiple
At 2.2x, Unilever’s P/S ratio is slightly lower than the ten year average of 2.2x. Similar to Ev/Sales, the P/S ratio is the lowest in the last five years. 2012 had the lowest P/S ratio of 1.7x.
Unilever P/FCF – Price/Free Cash Flow
P/FCF ratio in 2021 was 18.3x, which is lower than the ten year average of 23x, and except for 2020, it is the lowest in the last ten years. 2020 was the lowest at 17.7x.
Unilever Valuation Summary
Unilever Value Valuation Football Field Chart
Is Unilever a good investment?
Is Unilever a buy at current valuations?
At the time of analysis, the current stock price is at the lower end of the 52-week trading range and the analysts’ price targets.
The comps valuations are significantly higher than current prices because Unilever has relatively low valuation multiples compared to the sample set of competitors.
The DCF models all returned an intrinsic value above the current market value. To see more detail on the intrinsic valuations, see our post reviewing Unilever’s fundamentals and DCF models.
There are many elements to consider when understanding if a stock is a good investment. This post only aims to review if Unilever is a good value compared to its competitors – its relative valuation.
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