Key points
- Unilever could be strong in a crisis
- Excellent earnings record
- Potential £50bn acquisition has given the market food for thought
Chart data from global indexes, like the FTSE 100 or the NASDAQ, does not currently make pleasant reading for investors. Although the FTSE 100 is only down 1.79% in the past month, the NASDAQ is down 15.5% in that period. Given that markets have had a decent year overall, the recent downturn in price is troubling. This is why I want to buy shares in Unilever (LSE: ULVR), a FTSE 100 stalwart, to see me through any future difficulties.
A FTSE 100 value stock to see me through
Fundamentally, Unilever appears to be a smooth-running operation. As a consumer goods conglomerate, it owns well-known brands like Dove, TRESemme and Vaseline. It currently has operations in over 190 countries.
This stock has delivered consistent earnings for shareholders over the past five years. Indeed, earnings per share (EPS) data shows that the company has managed 5% compounding annual growth rate for this period. With a potential stock market crash in mind, this is exactly the steady fundamentals I like to see.
What’s more, it appears that Unilever shares are actually quite cheap. With price-to-earnings (P/E) ratio and the most recent EPS data, I am able to calculate the fair market value of this stock. The P/E ratio is 22 and the recent EPS is 248p, so Unilever stock is actually worth 5,456p per share.
According to my workings, therefore, the shares are currently trading at a 27.6% discount. By buying Unilever, I would be getting a great deal for my money. This FTSE 100 stock has great earnings and is trading at a discount. Also, as far as dividends go, this stock has a relatively stable yield of 3%
GlaxoSmithKline consumer healthcare
In recent days, much has been written about Unilever’s attempts to buy the GlaxoSmithKline consumer healthcare brand. The approach appears to have been made on 15 January 2022, with two subsequent bids made. The last bid amounted to £50bn and Unilever has since stated it will not increase this offer.
The market has looked with a degree of scepticism on this series of events. Société Générale recently upgraded the Unilever to ‘buy’ and increased its target price to 4,100p from 3,500p. It also believed that the acquisition could enhance this FTSE 100 stock’s own diversification. On the flipside, the bank stated that the leaked nature of the bid seemed “clumsy”.
Bank of America agreed that the proposed deal would balance Unilever’s portfolio but expressed concern at its lack of experience in the over-the-counter healthcare market. For me, however, it is heartening to see management trying to broaden the scope of the company’s operations.
At the current time, a stock market crash appears possible though not guaranteed, of course. Regardless, in times of strife I want companies that I can rely on. With its excellent earnings record and the global reach of its operations, this FTSE 100 stock is the right place to put my money just now. I will most certainly be buying this fantastic stock right now.
Andrew Woods does not own shares in any of the companies mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
