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The Unilever (NYSE: UL) share price has done well this year. It has risen for nine straight months, pushing it to its highest point on record. It jumped to a high of $57.68 in New York and has outperformed other companies like Procter & Gamble (PG), Colgate-Palmolive (CG), and Clorox.
Unilever stock vs Colgate vs Procter & Gamble vs Clorox
Unilever’s turnaround is underway
While Unilever stock has done well this year, it has underperformed the market in the past decade. For example, it has risen by 80% in the past decade while Procter & Gamble and Colgate soared by over 140% in the same period.
This performance happened as the company moved from one crisis to the other. For example, earlier this year, the company closed its Nigerian operations as the cost of doing business rose as the Nigerian naira plunged.
It also faced significant challenges in its Ben & Jerry’s division. Earlier this year, the company decided to spin it out into a separate company. It will also exit its other ice cream businesses like Magnum and Cornetto.
The company has also announced more measures to boost its business. For example, it is in the process of laying off 7,500 office-based jobs in a bid to cut costs and boost productivity. It hopes that these job cuts will lead to €800 million in cost savings.
Therefore, the stock’s rally is likely because investors anticipate that the turnaround will deliver results over time.
Unilever is a high-quality company
Unilever is one of the most important companies globally. It owns some of the most popular brands in the industry like Axe, Closeup, Dermalogica, Hellman’s, Lux, and Omo. Some of these brands like Dove, Knorr, and Hellman’s generate over $1 billion in annual sales.
The most recent results showed that its business did well in the first quarter, helped by volume growth.
Its total turnover rose by 1.4% to €15 billion, helped by the beauty and wellbeing business whose revenue rose by 3.1% to €3.2 billion. It was followed by the ice cream business whose revenue rose by 2.7% to €1.8 billion while its nutrition segment’s revenue rose to €3.4 billion.
Unilever expects that its business growth will continue growing albeit at a slower pace. It expects that its underlying sales growth this year will be between 3% and 5%. It also hopes that its margins will continue doing well.
Unilever is also a fairly valued company with a forward price-to-earnings ratio of 21.80, which was higher than the median estimate of 18.4. Its price-to-sales multiple of 2.18 is also higher than the sector median of 1.2. Also, the forward EV to EBITDA of 15.2, also higher than the sector median of 14.8.
These valuation metrics could be justified by the company’s margins. It has a gross margin of 42.2%, higher than the sector’s median of 35%. Its net income margin of 10.8% is also higher than the industry’s median of 4.58%.
Unilever share price forecast
The weekly chart shows that the UL stock price has been in a strong bull run this year. This rally accelerated recently as it moved above the key resistance point at $55.93, its previous all-time high.
Moving above that level was important because it invalidated the double-top pattern that has been forming. The stock has remained above the 50-week and 100-week moving averages.
Also, the Awesome Oscillator has jumped above the neutral point, which is a bullish sign. The Relative Strength Index (RSI) has risen above the overbought point.
Therefore, the stock will likely continue soaring as buyers target the key resistance point at $65. The next key catalyst for the stock will be its earnings on July 25th.
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