Investment Analysis of Unilever Company

This report provides an investment analysis of Unilever company, including financial analysis, valuation, market share, and competitive positioning. It analyzes the company's liquidity position, market coverage, and market share growth. The report also discusses the company's business model, core products, and contribution to revenues. It concludes with a financial analysis, including profitability and liquidity ratios.

Investment Analysis

Contents
EXECUTIVE SUMMARY.......................................................................................................................3
MAIN BODY.............................................................................................................................................4
Investment summary...............................................................................................................................4
Business Description...............................................................................................................................4
Industry Overview and Competitive Positioning.....................................................................................8
Financial analysis..................................................................................................................................12
Valuation...............................................................................................................................................16
Investment risks.....................................................................................................................................18
Disclosures............................................................................................................................................18
APPENDIX:.............................................................................................................................................19
REFERENCES........................................................................................................................................26

EXECUTIVE SUMMARY
The project report is based on a FTSE listed company named Unilever company. The company
operates in consumer goods sector and had a large product portfolio. In the report, various kinds
of aspects are covered including financial analysis of company, valuation, market share etc. In
terms of three-year financial analysis, it can be summarized that company’s liquidity position is
poor. The latest news about company is that their CEO stated that company reported just 0.3%
growth in last few months due to COVID 19. The current share price of company is around,
62%.

MAIN BODY
Investment summary
In this part of report, recommendation to buy/sale/ hold the share of Unilever has been done by
help of a valuation model. Below descriptive analysis is done in such manner:
PE ratio: Current share price/ Earnings per Share
Current share price: $62.58
Unilever's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in June
2020: $2.52
Price to earnings: 62.58/2.52
= 24.85
Recommendation: On the basis of above computed value price to earnings ratio, this can be
recommended that investors should buy company’s share. This is so because value of earnings
per share is more than one and it is a positive sign that investors will not face any lose if they buy
stock X. There is only concern about buying to this stock is that in upcoming time period, there
can be inflation in company’s financial performance which may lead to decreased value of
company’s share or stock price. In this case, investors may face loss on stock X. Though, it is
just a possibility because actual data is presenting that investors should buy the stock due to
effective ratio. It is rare that company’s earnings will fell down to below one from currently
value of $2.52.
Business Description
In this aspect of report, detailed analysis of selected company has been done in such manner:
About company- Unilever company is a British Dutch global company that is headquartered in
London, United Kingdom, Rotterdam and Netherlands. The company was founded in year 1929
by merging of Dutch margarine manufacturer and British soap makers (About Unilever

company, 2020). This company has around 400 brands with an average turnover of 53 million
Euro per year.
Core business- The company is categorized into four different divisions named as: food,
refreshments, home care and personal care. Below a table is presented which shows detailed
information about core products and service of company:
Segment Item
Food Condiments and extracts (Beef, French
mayonnaise, sauces, Asian spices etc.),
desserts (ice pops, ice creams, syrups etc.)
these are some examples, as it is difficult to
describe each item.
Refreshment Tea, coffee, juice packets, milk products,
breakfast cereal and many more.
Home care Cleaner (detergents, fabric softeners),
decorative items and many more.
Personal care Make up kit, cloths, nail files, shoes,
perfumes, hand soap, shampoo and many
more.
Contribution to revenues- Each of these products plays a key role in order to generate overall
revenues of company (About contribution of each product, 2019). Below contribution of
different types of product portfolio is explained in such manner:
Data in Million Euros 2017 2018 2019
Food and refreshment 20697 20227 19287
Home care 10574 10131 10825
Personal care 20697 20624 21868

2017 (Data in Million Euros)
2018 (Data in Million Euros)
2019 (Data in Million Euros)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
20697
20227
19287
10574
10131
10825
20697
20624
21868
Contributi on to revenues of each
product segment
Food and refreshment Home care Personal care
Business model- Each company has a particular model in order to gain revenues. Unilever plc
focuses on direct to consumer business model. The objective of this model is to sell items
without any mediator. As there are numerous stores of Unilever in which consumers can directly
visit and can make purchase. This model was effectively implemented in year 2017 (About
business model, 2019).
Underneath a table is presented that shows main sources of revenues of company:
Categories
Personal care
Turnover 20.7 Billion Euro 20.2 Billion Euro 20.1 Billion Euro
Turnover growth 2.6% 0.5% 13.2%

Underlying sales
growth
2.9% 4.2% 4.1%
Operating margin 19.8% 18.4% 18.1%
Underlying operating
margin
21.1% 20% 19.7%
Home care
Turnover 10.6 Billion Euro 10 Billion Euro 10.2 Billion Euro
Turnover growth 5.6% -1.5% 10.9%
Underlying sales
growth
4.4% 4.9% 5.9%
Operating margin 10.8% 9.5% 7.3%
Underlying operating
margin
12.2% 10.9% 8.4%
Food
Turnover 12.5 Billion Euro 12.5 Billion Euro 12.9 Billion Euro
Turnover growth -0.1% -3.1% 4.5%
Underlying sales
growth
1% 2.1% 1.5%
Operating margin 18.2% 17.4% 17.8%
Underlying operating
margin
19.7% 19.1% 19.1%
Refreshments
Turnover 9.9 Billion Euro 10 Billion Euro 10.1 Billion Euro
Turnover growth -0.8% -1.1% 10.3%
Underlying sales
growth
4.9% 3.5% 5.4%
Operating margin 13.5% 9.7% 8.3%
Underlying operating 12.7% 11.1% 10.2%

margin
Industry Overview and Competitive Positioning
Overview of market- Unilever plc operates in multiple nations and in each country they have
successful record of having market shares. Basically, company operates at a global level and had
wide range of coverage over market (About market share of Unilever in each nation, 2020).
Herein, below a table is presented that shows market coverage of company in different nations:
Name of nation Coverage (Current time period) Change from last year
India 22.78% ^ 8.25%
China 3.88% ^ 30.96%
USA 13.68% ^ 13.52%
UK 7.07% v 10.65%
Brazil 6.13% ^ 9.58%
India China USA UK Brazil
22.78%
3.88%
13.68%
7.07% 6.13%
Market share in different nations

Market share of key players and Unilever- The selected organization has a number of
competitors and each of them affected by their policies and strategies (About market shares of
Unilever, 2019). Below market shares of Unilever during last 5 years are mentioned:
Value of
share in
accordance of
31st
December in
each year.
2015 2016 2017 2018 2019
Market share 37.75% 35.91% 51.49% 59% 56.55%
2 01 5 2 01 6 2 01 7 2 01 8 2 01 9
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
37.75% 35.91%
51.49%
59.00% 56.55%
Market share of unilever
The above mentioned chart is showing that there is fluctuation in market share growth of
company. The higher market share was in year 2018 of 59% while lowest was in year 2016 of
35.91%. At current time period market share of company is of 61.23% (16th September 2020).
This shows that company’s share price is far better compared to last five years and expected to
grow with more numbers.
Recent trends in past 5 years of market share of Unilever:

Increase/decrease from past year
2016 -1.84%
2017 15.58%
2018 7.51%
2019 -2.45%
2016 2017 2018 2019
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
-1.84%
15.58%
7.51%
-2.45%
Increase/decrease from past year
This chart shows that after year 2017, there is decreased performance of Unilever in terms of
market share. There was growth only between year 2016 to 2017.
Market share of rivalries: Unilever company’s main competitors are Tesco, Morrison’s, Reckitt
Benckiser etc. Underneath market share of one key competitor is mentioned:
Market share of Tesco:
Value of
share in
accordance of
31st
2015 2016 2017 2018 2019

December in
each year.
Market share 28% 28.3% 28.2% 27.6% 27.3%
2015 2016 2017 2018 2019
28.00%
28.30%
28.20%
27.60%
27.30%
Market share OF TESCO
This chart shows that market share of Tesco is decreasing in a consistent manner. The higher
share was in year 2016 that was of 28.30% (About market share of Tesco, 2019).
Competitive strategies of Unilever- This company applied different kinds of strategies to beat
their competitors such as:
 Market penetration- As per this strategy, company focus to enhance sales volume that
leads to increased revenues and growth (Vogel, 2020).
 Product development- It is used as secondary strategy which is used for business growth
purpose. This is applied by introducing new products to exist customers.
 Market development- This is applied as supportive strategy in which Unilever enters into
new market (About Unilever competitive strategies, 2020).
 Diversification: It is also used as supportive strategy in that company plans to establish
new business with an aim of higher growth.

Market positioning- The principle of Unilever to do business is to operate with honesty, integrity
and openness (About Unilever positioning, 2020). This way of doing business increase their
goodwill in market as well as customers make a positive perception towards them.
Financial analysis
In order to analyze financial performance of companies, there are various methods and ratio
analysis is one of them. Below some ratios are measured in regards with Unilever:
Profitability ratios:
 Gross profit ratio-
2017 2018 2019
42.60%
42.80%
43.00%
43.20%
43.40%
43.60%
43.80%
44.00%
44.20%
43.13%
43.57%
44.01%
Gross profi t r ati o
Analysis- The above chart is showing that there is growth in gross profit ratio in last three
years. In each year, gross profit ratio is increasing. The rationale behind this is the higher
revenues and controlled cost of sales.
 Net profit ratio-

2017 2018 2019
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
12.07%
19.24%
11.59%
Net profi t rati o
Analysis- There is fluctuation in net profit ratio of company. The higher net profit ratio
was in year 2018 of 19.24%. The rationale behind decreased performance in year 2019 is
higher operational expenditures.
Liquidity ratios:
 Current ratio:
2017 2018 2019
0.7
0.71
0.72
0.73
0.74
0.75
0.76
0.77
0.78
0.73
0.78 0.78
Cur rent r ati o

Analysis- The above mentioned chart is showing that company is not able to meet ideal
criteria of current ratio which is of 2:1 times. In year 2018 and 2019, company had
similar current ratio of 0.78 times. The reason behind this poor performance is because of
higher short term expenses.
 Quick ratio:
2017 2018 2019
0.46
0.48
0.5
0.52
0.54
0.56
0.58
0.5
0.56 0.58
Quick rati o
Analyze- The above chart shows that company’s quick ratio is progressing in an effective
manner. Though, company failed to meet ideal criteria of quick ratio that is of 1.5: 1
times. The reason of this poor performance is because of lack of current assets.
Efficiency ratio:
 Stock turnover ratio:

2017 2018 2019
6
6.2
6.4
6.6
6.8
7
7.2
7.4
7.6
7.8
7.7
6.69
6.99
Stock tur nover rati o
Analysis- The stock turnover ratio shows company’s efficiency to manage their stock.
The above chart is indicating that performance of company in terms of managing stock
was better in year 2017 as ratio was higher with value of 7.7 times.
 Accounts receivable turnover ratio:
2017 2018 2019
0
2
4
6
8
10
12
14
16
15.16 13.04 10.25
Account receivable turnover ratio
Analysis- This chart is showing that company’s efficiency to cover debt from debtors has
been reduced in last two years as the ratio is decreasing. The reason behind this poor
performance can be higher credit sales or insolvent debtors.

Valuation
There are different types of valuation models which are used to valuate companies’ performance.
In relation to above chosen company, this model has been applied in such manner:
 Price to earnings- The model states relation between share price of company and total
earnings generated from share (Corbet, Urquhart and Yarovaya, 2019). In the context of
above company, it has been performed below in such manner:
Current share price: $62.58
Unilever's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in
June 2020: $2.52 (Unilever’s PE Ratio, 2020).
Price to earnings: 62.58/2.52
= 24.85
Price to earnings of Tesco:
Current share price: $8.57 (Tesco’s PE ratio, 2020).
Tesco's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in
February 2020: $0.3
Price to earnings: 8.57/0.3
= 22.56
Comparative analysis- This data is indicating that at current time period, stock price of
Unilever is overvalued because of value of earnings which is more than one (1<2.52). On
the other hands, Tesco company’s stock price is undervalued because of lower value of
EPS that is of 0.3 (1>0.3). It indicates that Unilever’s performance is better.

 Price-to-Book value of equity- This can be understood as a form of ratio which is used
make comparison of company’s current market price with its book value. There are
mainly two ways by which calculation can be performed, though answer needs to be
similar in both methods. In relation to above company, this model is applied in such
manner:
Unilever NV's share price: $62.58
Unilever NV's Book Value per Share for the fiscal year that ended in December 2019:
$5.60 (Unilever Price-to-Book value of equity ratio, 2019).
Price-to-Book value of equity of Unilever: 62.58/5.60
= 11.75
Price-to-Book value of equity of Tesco:
Current share price: $8.57
Tesco NV's Book Value per Share for the fiscal year that ended in December 2019: $5.33
(Tesco Price-to-Book value of equity ratio, 2020).
Price-to-Book value of equity of Tesco: 8.57/5.33
= 1.61
Comparative analysis- On the basis of above measured values of PB ratio, this can be
find out that performance of Unilever plc is far better as compared to Tesco plc. This is
so because Tesco has a lower market share price and due to which book value per share is
also lower that is resulting in decreased performance of company.

Investment risks
There are different types of risks which may be faced by investors because of poor performance
of company. In relation to Unilever plc, some key investment risks are mentioned underneath:
 Liquidity risk- It can be defined as a form of risk that occurs in companies due to lack of
availability of assets or cash in order to make payment of short term debts (Yüksel,
Dinçer and Meral, 2019). In context of above chosen company they and their investors
may face this risk. It is so because company’s performance is poor in regards to liquidity
as described in above financial analysis part.
 Inflation risk- This is a form of risk which raise in companies because of some external
and internal factors like increased interest rate, decreased performance etc. In above plc,
investors may face this risk because their net profitability risk has been reduced by a huge
gape.
Disclosures
In the context of above Unilever company, it is essential for all members that they should
disclose their clients and all matters mentioning possession of investment. A member is liable to
disclose such conflicts:
 Material possession in members’ firm’s investment
 Directorship
 Marketing activities

APPENDIX:
Calculation of ratios:
Gross profit ratio
All
data
in
Euro
Milli
on
2017 2018 2019
Gros
s
profi
t
23168 22213 22878
Net
sales 53715 50982 51980
Calc
ulati
on
23168/5
3715*1
00
22213/5
0982*1
00
22878/5
1980*1
00
Gros
s
profi
t
ratio
43.1313 43.57% 44.01%
Net profit ratio
All
data
in
Euro
2017 2018 2019

Milli
on
exce
pt
net
profi
t
ratio
Net
profi
t 6486
9808 6026
Net
sales 53715 50982 51980
Calc
ulati
on
6486/53
715*10
0
9808/50
982*10
0
6026/51
980*10
0
Net
profi
t
ratio
12.0748
4
19.24% 11.59%
Current ratio:

All
data in
Euro
Millio
n
except
curren
t ratio 2017
2018 2019
Curre
nt
assets 16983
15481 16430
Curre
nt
liabilit
ies 23177
19772 20978
Calcul
ation
16983/
23177
15481/
19772
16430/
20978
Curre
nt
ratio
0.73
times
0.78
times
0.78
times
Quick ratio:
All
data in
Euro
Millio
n
2017 2018 2019

except
quick
ratio
Quick
assets 11688 11180 12266
Curre
nt
liabilit
ies 23177
19772 20978
Calcul
ation
11688/
23177
11180/
19772
12266/
20978
Quick
ratio
0.5042
93
0.56
times
0.58
times
Stock turnover
All
data in
Euro
Million
except
stock
turnov
er ratio 2017
2018 2019
Cost of 30547 28769 29102

goods
sold
Invent
ory 3962 4301 4164
Calcul
ation
30547/
3962
28769/
4301
29102/
4164
Stock
turnov
er ratio
7.7099
95
6.69
times
6.99
times
AR turnover
All
data in
Euro
Million
except
accoun
t
receiva
ble
turnov
er ratio 2017
2018 2019
Net
credit
sales 53715
50982 51980
Averag
e
accoun
ts
receiva
3439 3910 5072

ble
Calcul
ation
53715/
3439
50982/
3910
51980/
5072
Accou
nt
receiva
ble
turnov
er ratio
15.619
37
13.04
times
10.25
times
Financial statement of Unilever:
Income statement-
UNILEVER PLC (ULVR) INCOME STATEMENT
Fiscal year ends in December. EUR in millions except per share
data.
2017-
12
2018-
12
2019-
12
Revenue 53715 50982 51980
Cost of revenue 30547 28769 29102
Gross profit 23168 22213 22878
Operating expenses
Research and development 900 900 840
Sales, General and administrative 13411 8778 13330
Other operating expenses 96 25 30
Total operating expenses 14407 9703 14200
Operating income 8761 12510 8678
Interest Expense 565 604 763
Other income (expense) -43 477 374
Income before taxes 8153 12383 8289
Provision for income taxes 1667 2575 2263
Net income from continuing operations 6486 9808 6026

Other -433 -419 -401
Net income 6053 9389 5625
Net income available to common shareholders 6053 9389 5625
Earnings per share
Basic 2.16 3.5 2.15
Diluted 2.15 3.48 2.14
Weighted average shares outstanding
Basic 2802 2683 2616
Diluted 2814 2695 2627
EBITDA 10256 14734 11034
Balance sheet:
UNILEVER PLC (ULVR) BALANCE SHEET
Fiscal year ends in December. EUR in millions except per share
data.
2017-
12
2018-
12
2019-
12
Assets
Current assets
Cash
Cash and cash equivalents 1984 3230 4185
Short-term investments 377 680 887
Total cash 2361 3910 5072
Receivables 3439 4350 4916
Inventories 3962 4301 4164
Prepaid expenses 1333
Other current assets 5888 2920 2278
Total current assets 16983 15481 16430

Non-current assets
Property, plant and equipment
Gross property, plant and equipment 19398 19924 24043
Accumulated Depreciation -8987 -9577 -11981
Net property, plant and equipment 10411 10347 12062
Goodwill 16881 17341 18067
Intangible assets 11520 12152 12962
Deferred income taxes 1085 1117 1336
Prepaid pension benefit 2173 1728 2422
Other long-term assets 1232 1290 1527
Total non-current assets 43302 43975 48376
Total assets 60285 59456 64806
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 7694 2947 4067
Capital leases 11 13 383
Accounts payable 8217 9121 9190
Taxes payable 1627 1943 1405
Other current liabilities 5628 5748 5933
Total current liabilities 23177 19772 20978
Non-current liabilities
Long-term debt 16007 21258 21818
Capital leases 120 115 1536
Deferred taxes liabilities 1913 1923 2573
Accrued liabilities 146 121 117
Pensions and other benefits 2734 2602 2618
Minority interest 758 720 694
Other long-term liabilities 1801 1373 1280
Total non-current liabilities 23479 28112 30636
Total liabilities 46656 47884 51614

Stockholders' equity
Common stock 484 464 420
Additional paid-in capital 130 129 134
Retained earnings 26648 26265 18212
Accumulated other comprehensive income -13633 -15286 -5574
Total stockholders' equity 13629 11572 13192
Total liabilities and stockholders' equity 60285 59456 64806

REFERENCES
Books and journal:
Vogel, H.L., 2020. Entertainment industry economics: A guide for financial analysis. Cambridge
University Press.
Corbet, S., Lucey, B., Urquhart, A. and Yarovaya, L., 2019. Cryptocurrencies as a financial
asset: A systematic analysis. International Review of Financial Analysis, 62, pp.182-199.
Yüksel, S., Dinçer, H. and Meral, Y., 2019. Financial analysis of international energy trade: a
strategic outlook for EU-15. Energies, 12(3), p.431.
Online:
About market share of Unilever in each nation, 2020. [online] available through:<
https://www.similarweb.com/website/unilever.com/#overview>
About contribution of each product, 2019. [online] available through:<
https://www.statista.com/statistics/269200/revenue-of-the-unilever-group-worldwide-by-
product-segment/>
About business model, 2019. [online] available through:< https://fourweekmba.com/unilever-
business-model/#:~:text=Unilever%20leverages%20on%20a%20direct,over%20fifty
%20billion%20in%20revenues.&text=Also%2C%20the%20company%20leverages
%20on,of%20minds%20of%20its%20consumers.>
About market shares of Unilever, 2019. [online] available
through:<https://www.macrotrends.net/stocks/charts/UN/unilever/stock-price-history>
About market share of Tesco, 2019. [online] available
through:<https://www.ifcmarkets.co.in/en/market-data/stocks-prices/tsco>
About Unilever competitive strategies, 2020. [online] available through:<
http://panmore.com/unilever-generic-strategy-intensive-growth-strategies>
About Unilever positioning, 2020. [online] available through:<
https://www.unilever.com/about/our-position-on/>

Tesco’s PE ratio, 2020. [online] available through:<
https://www.gurufocus.com/term/pettm/TSCDY/PE-Ratiottm/TescoPLC#:~:text=Tesco's
%20Earnings%20per%20Share%20(Diluted,Ratio%20for%20today%20is
%2022.56.&text=During%20the%20past%2013%20years,Ratio%20of%20Tesco%20was
%201108.57.>
Unilever’s PE Ratio, 2020. [online] available through:< https://www.nasdaq.com/market-
activity/stocks/ul/price-earnings-peg-ratios>
Unilever Price-to-Book value of equity ratio, 2019. [online] available through:<
https://www.gurufocus.com/term/pb/NYSE:UN/PB-Ratio/Unilever-NV#:~:text=As
%20of%20today%20(2020%2D09,Ratio%20of%20today%20is%2010.89.>
Tesco Price-to-Book value of equity ratio, 2020. [online] available through:<
https://www.sharesmagazine.co.uk/shares/share/TSCO/fundamentals>
About Unilever company, 2020. [online] available through:<
https://www.unilever.com/about/who-we-are/about-Unilever/>