Unilever plc Could Be Worth £39 In Five Years

Shares in Unilever plc (LON: ULVR) look set for a very nice five years.

| 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.

Some shares are exciting and inspire people to try to get rich quick, while others are considered safer and more reliable, and better suited to patient long-term investing.

UnileverUnilever (LSE: ULVR) (NYSE: UL.US) is firmly in the latter category, and its wide range of household products make it one of the most reliable on the market. With the firm owning a dozen or more worldwide brands with annual sales of a billion euros or more (including Lipton, Dove, Knorr and Sunsilk) together with hundreds of other well-known names, there can’t be many families on the planet who never buy a Unilever product.

Look at the cash!

But being unexciting and “reliable” in this way doesn’t mean a share does not make good gains. Would you be surprised, for example, to learn that the Unilever price has almost doubled in the past five years?

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

At £26.76 today, the shares are up 84% on their price of £14.50 from from May 2009, and there’s around another £2.60 per share to add from dividends — taking the total return to over 100%. Still think “safe and reliable” means boring?

Sure, that period starts in the dark days of 2009, but if we look back over 10 years the recession already looks like just a blip — and over the decade, Unilever shares have soared by 140% compared to just 50% for the FTSE 100, as earnings from the consumer products giant have just kept on going.

But what about the future?

Forecasts look good

Well, forecasts for the year to December 2014 suggest underlying earnings per share (EPS) of around 131p, and from the 104p recorded in 2009, that would be a five-year rise of 26% (and if forecasts prove accurate, the dividend will have more than trebled).

Suppose we see the same rate of earnings growth over the following five years — and that’s not stretching things at all, I don’t think — what could a share bought today be worth?

Another rise of 26% would take EPS up to 165p, and assuming a constant P/E (and it’s remained pretty stable at an average of around 19 for some time), that would suggest a share price rise to £33.75.

Then we have dividends to add. Forecasts suggest a yield of around 3.5%, so if the annual payout were to rise by the same proportion as the share price each year, we’d expect to add another £5.40 per share in cash.

So what’s it worth?

A single Unilever share bought now for £26.79 could be worth a total of £39 in five years time, and that’s a return of 46%. A handful of shares that could grow at that rate over the long term would make a nice basis for a profitable portfolio.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Alan does not own any shares in Unilever. The Motley Fool owns shares in Unilever.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Up 20% in a month, should investors consider buying Marks & Spencer shares?

Shares in retailer Marks and Spencer have surged ahead over the last month, despite a cyberattack. Roland Head takes a…

Read more »

Charticle

Here are the latest growth and share price targets for Nvidia stock

Ben McPoland checks out the latest forecasts for Nvidia stock to assess whether it might be worth considering for a…

Read more »

Growth Shares

Yikes! This could be the most undervalued growth stock in the FTSE 100

Jon Smith flags up a growth stock with a low price-to-earnings ratio and a share price back at 2020 levels…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

3 beaten-down FTSE 250 shares to consider buying before the next bull market

Paul Summers thinks brave investors should ponder buying some of the FTSE 250s poor performers before they recover strongly.

Read more »

Investing Articles

Gold prices soar while the Fresnillo share price slumps. What gives?

With a gold bull market in full swing, this Fool argues that the falling Fresnillo share price may not remain…

Read more »

Investing Articles

2 FTSE 100 shares I’m avoiding like the plague right now

While the FTSE remains packed with opportunity, many of the index's blue-chip shares could be at risk as trade tariffs…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Here’s how an investor could aim for a million buying under 10 shares

Christopher Ruane explains why doing less, not more, of the right things could be the key to success as an…

Read more »

Investing Articles

Could this new risk cause a stock market crash?

Tariffs and a potential recession are two major stock market risks right now. But there’s another risk that concerns Edward…

Read more »