Unilever plc (LON: ULVR) share price has fallen 11.7% since January and is now trading at what some would consider a discounted price. So should you buy its shares?
The multinational consumer goods company has struggled to generate the impressive sales witnessed last year as countries eased lockdown restrictions and investors focused shifted from value stocks to growth stocks.
Unilever’s share price decline was also fueled by concerns about rising consumer inflation that has forced the company to hike the prices of its consumer goods, which make them less competitive in the market.
While the company’s consumer brands are widely regarded as premium brands, its customers can justify the price premium, and rising inflation may force consumers to rethink their choices of everyday products and opt for cheaper brands.
Some of the favourable tailwinds behind Unilever include its global operations in less developed countries with growing middle-class populations, embracing premium consumer goods for the first time.
Unilever’s Q3 earnings results showed that it registered impressive growth in emerging markets led by Latin America. The most impressive results were from Brazil, where the company recorded double-digit price increases that offset lower volumes.Â
Another positive factor that sends a strong signal about the company is the significant share purchases by company insiders. Graeme Pitkethly, Unilever’s CFO and Executive Director, bought shares worth £750,000 in the past 12 months.
The company’s insiders own shares worth £42 million in total, equating to a 0.04% stake in the company, which shows that they are confident in its prospects.
While we can’t tell how Unilever shares will perform in the future, the company owns multiple respected global brands that will continue generating sales over the long term. Therefore, the question on my mind is whether the company’s earnings shall rise in future.Â
For now, I think the company faces a significant challenge in the form of rising inflation. However, it can counteract the rising prices with marketing activities that draw new customers to its brands while making existing customers excited about its products.
Unilever shares are trading off the crucial 3800p support level from a technical perspective and could head higher if the level keeps holding once retested.
This is not investment advice. Always do your due diligence before making investment decisions.Â
Unilever share price.
Unilever share price has fallen 11.66% since January as investors’ focus shifted to growth stocks. Should you buy it?
Should you invest in Unilever shares?
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