Unilever Is Breaking Out & Could Go Higher

Source: http://www.flickr.com/photos/withoutsound/

Source: http://www.flickr.com/photos/withoutsound/

Unilever (NYSE:UL) is a large $120 billion non-cyclical consumer goods company that’s had a rough stretch over the last year. Still, compared to its peers Procter & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL), and Clorox (NYSE:CLX), Unilever trades at a discount, and with a nice dividend, it might in fact trade higher.

In case you’ve never heard of Unilever, it manufactures and supplies brands like Dove, Axe, Lipton, and Ben & Jerry’s, along with 30 other brands. Last year, the company’s stock significantly underperformed the broader market with gains of only 5 percent; this after currency exchange issues hurt the company’s revenue growth.

While currency exchange issues in emerging markets have affected a number of consumer companies, Unilever trades with the biggest discount relative to any of its large peers.

Company P/E Ratio Dividend
Unilever 18.2 3.6%
P&G 21.4 3.1%
Colgate 26.9 2.2%
Clorox 20.5 3.2%

As you can see, Unilever is not only the cheapest of its peers, but also pays the highest dividend. Due to the recent pullback within certain sectors of the market, it should serve as no surprise that investors have rotated capital into Unilever, which has soared 7 percent in the last week alone. When you look at the company as a whole, it’s a strong fundamental performer that is priced for gains.

Last year, Unilever saw its total revenue decline 3 percent over 2012. However, much of that decline can be attributed to the currency headwinds, as the company’s underlying sales grew 4.3 percent in 2013, and emerging market revenue excluding currency increased 8.7 percent. Hence, the company is performing nicely, and is also keeping costs in check, as its operating profit rose 8 percent last year.

With that said, the household and personal products industry trades at 21.2 times earnings, and at 18.2 times earnings, Unilever could rally in excess of 16 percent before catching up to its industry average. Given its large dividend, Unilever looks like an attractive and safe stock in a market that could go either way.

More From Wall St. Cheat Sheet: