4 Consumer Stocks Set To Post Stellar Returns: Unilever plc, WM Morrison Supermarkets PLC, DFS Furniture PLC And Findel plc

These 4 stocks look set to soar: Unilever plc (LON: ULVR), WM Morrison Supermarkets PLC (LON: MRW), DFS Furniture PLC (LON: DFS) and Findel plc (LON: FDL)

| 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.

Most consumer goods companies fall into one of two camps: cyclical or defensive. The former, of course, indicates that the goods that the company sells are either not necessary or are a luxury purchase which can be avoided during challenging economic periods. The latter, meanwhile, are day-to-day items which are required and people could not do without.

Clearly, companies focused on necessity products such as food and clothing are likely to offer more stable financial performance than their cyclical peers. However, at the same time, cyclical companies can offer more upside in the long run – as long as you are able to stomach above-average volatility. Therefore, a mix of the two can prove to be a prudent and logical way forward for Foolish investors.

Cyclicals

With the UK economy continuing to go from strength to strength, cyclical consumer goods companies such as furniture seller, DFS (LSE: DFS), and Express Gifts owner, Findel (LSE: FDL), are on the up. Both companies are forecast to increase their earnings at a rapid rate, with DFS’s bottom line set to rise by 16% next year and Findel’s by as much as 21% in the current year. Clearly, such strong growth rates could act as positive catalysts on the share prices of the two companies, since they are at least double the growth rate of the wider index.

Should you invest £1,000 in Dfs Furniture Plc 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 Dfs Furniture Plc made the list?

See the 6 stocks

Despite this, both DFS and Findel trade on low valuation multiples, which indicate that they offer wide margins of safety. This appears to swing the risk/reward ratio in the investor’s favour, with DFS having a price to earnings growth (PEG) ratio of just 0.8 and Findel’s being even lower at 0.4. As such, and while they are cyclical businesses, they appear to be worth buying at the present time.

Defensives

Meanwhile, Unilever (LSE: ULVR) (NYSE: UL.US) and Morrisons (LSE: MRW) are far more defensive than DFS or Findel. In Unilever’s case, its defensive sales profile comes via the strength of its brands, since there are cheaper shampoos and other personal care products available.

However, even during challenging periods for the global economy, Unilever continues to command relatively high margins and, with over half of its revenue being derived from emerging markets, its growth rate is also very appealing. In fact, Unilever is set to grow its top line by 4.7% next year and, with cost savings and efficiencies to come through, its bottom line growth should be higher and could catalyse investor sentiment.

Of course, the sale of food is defensive since it is a necessity for all individuals. However, the pressure on household budgets in recent years has meant that many consumers have traded down to discount, no-frills operators such as Aldi and Lidl. This has meant that supermarkets such as Morrisons have lost out, with the company’s sales stagnating in the last five years, with heavy discounting and promotional offers causing margins to be squeezed heavily.

As such, Morrisons has made a loss in each of the last two years but, in the current year, it is expected to turn this around to post a profit of £377m on a pretax basis. And, with growth of 20% expected for next year, it could prove to be a surprisingly strong performer over the medium term – especially since it has a price to earnings (P/E) ratio of 15.6.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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 Findel, Morrisons, and Unilever. 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.

More on Investing Articles

Investing Articles

What’s up with the Lloyds share price?

The Lloyds share price is up 26% in 2025, representing one of the strongest performance on the FTSE 100. Dr…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Here’s how a 40-year-old could start investing £100 per week to retire early

If a 40-year-old decides to start investing today, here's how they could potentially turn £100 a week into over £500k…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

The FTSE 100 is up 60% in 5 years. Here’s why — and a big lesson!

The flagship FTSE 100 index has put in a very strong performance over five years. There's a specific reason for…

Read more »

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »