UNILEVER PLC AMER (UL)
From ValueWiki
Large European consumer products conglomerate with over 400 brands.
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Business
Here are a few of their many (400 plus) high quality brands:
- Hellmann’s
- Knorr
- Wishbone
- Bertolli
- Becel
- Country Crock
- Slim*Fast
- Lipton
- Breyers
- Ben & Jerry’s
- Klondike
- Popsicle
- Birds Eye
- Snuggle
- Surf
- Dove
- Pond’s
- Suave
- Close Up
- Calvin Klein fragrances
Many of these strong brands dominate their product sector and command premium prices. Unilever’s global brands provide the company a major competitive advantage against new entrants in the market.
Official Links
Company Analysis
Over the past four years, free cash flows have been bouncing up and down at Unilever. There is no clear trend. Due to a stock split and restructuring it is rather difficult to analyze the historical financial data.
For this valuation, I am using a 10% discount rate, which is the same rate as I’ve been recently using for other stock valuations given how low interest and inflation have been. I intentionally avoid using a discount rate below 10% in order to build in a further margin of safety.
I next take a look at Unilever’s growth rates. It appears to fall within a 4 to 6 percent range. I decided to run the valuation model using a 5% growth rate for free cash flows. A 5% rate of growth is consistent with the most current rate of growth in the 2006 third quarter trailing nine month net profit from continuing operations versus the previous year’s nine month net profit from continuing operations. Recent sales growth is also in alignment with this growth estimate, coming in at 4.8% this past quarter. The 5% growth rate is also slightly below analyst estimates of a 6.4% growth over the next five years.
Plugging these numbers into the Gordon Growth Model, I estimate that the present value of future free cash flows to be €73,940 million. To determine the value of common stock equity, I add in cash and cash equivalents of €1,440 million. Then I subtracted current and long-term debt of €10,760 million. I also factored out €412 million worth of minority interests. The result is an intrinsic stock value estimate of €64.208 billion.
The next step in calculating the intrinsic value per share can be a bit tricky for dual class stocks and for ADRs. Thankfully, Unilever has made this a bit easier to do recently as a result of the Unilever PLC ADR stock split/restructuring and they have provided most of the detail for us in their shareholder FAQ. Now one share of the UL ADRs are equivalent to one share of Unilever PLC. In addition, the Unilever PLC shares are now equivalent to the Unilever NV shares. Unilever provides financial data that combines the operations of both Unilever PLC and Unilever NV. After carefully walking through these details, I determined that the total intrinsic stock value I calculated before needs to be divided by 2,968 million shares.
The calculated per share value is €21.63. I then convert that into U.S. dollars by using the most recent exchange rate of 1.29 U.S. dollars per Euro. Therefore, my intrinsic value estimate for UL is also $27.91.
News Feed
| 08/19/08 3:08 pm | Starbucks, PepsiCo, Unilever in beverage licensing agreement (at MarketWatch) |
| 08/19/08 3:08 pm | Starbucks, Pepsi and Unilever Partner to Grow the Tazo(R) Tea Ready-to-Drink Business (Business Wire) |
| 08/19/08 3:08 pm | PepsiCo to distribute Tazo Tea more widely (AP) |
| 08/19/08 10:08 am | Stagflation? Or just stagnation? (at CNNMoney.com) |
| 08/14/08 8:08 am | Turbulent Economic Times Changing Shopping Behaviors: Unilever Study (Business Wire) |
| 08/08/08 3:08 pm | Sara Lee Sprints to the Finish (at Motley Fool) |
| 08/07/08 6:08 am | Nestle Bottom Line Fed by Growth, Higher Prices (at SmartMoney.com) |
| 08/06/08 10:08 am | Spice Up Your Dinner Table With America's Regional Flavors (PR Newswire) |
| 08/06/08 9:08 am | A Triple-Play Stock (at Motley Fool) |
| 08/05/08 7:08 am | Positioning Your Portfolio for Tough Times (at BusinessWeek) |
Risks
- The company appears to be free of any major legal problems.
- Unilever does have substantial pension obligations.
Research Links
- UNILEVER PLC AMER Snapshot
- Profile at Yahoo Finance
- Profile at MoneyCentral.com
- Company Events
- Earnings Estimates
- Competitors at Yahoo Finance
- UNILEVER PLC AMER Leadership
- Officers and Directors at Reuters
- Salaries and Compensation at Reuters
- Insider Trades at Money Central
- Insider Trades at TheStreet.com
- Institutional Ownership at Money Central
- UNILEVER PLC AMER Fundamentals
- Key Statistics Yahoo Finance
- Key Ratios at Reuters
- Dividends and Returns at Morningstar
- SEC Filings at Edgar Online
- Financial Statements Quickview at Morningstar
- Historical Prices at Yahoo Finance
- Analyst Estimates
- All Press Articles
- UNILEVER PLC AMER Technical Analysis
- UNILEVER PLC AMER Message Boards
