Unilever Share Price (ULVR)

Thanks Mr D it seems like we agree on most things & I certainly hope that I am wrong about the SP here. That is until I buy my holding which will probably be in the next couple of months when the US interest rates get to where I think they will.
GL All.

Hello Gary59, the £48 fair value estimate is based on what I think is a conservative view of future dividends (although whether it turns out to be conservative is another matter).

It's basically a discounted dividend valuation, so I estimate future dividends based on various factors (rate of return on capital, amount of earnings retained etc) and then discount those future dividends by 7% per year as that's the UK stock market's long-term annualised total return.

I'm certainly not saying that I expect the price to get to £48 anytime soon, but as things stand today, I think that would be a reasonable price.

I agree with you that investor sentiment towards Unilever is generally poor, partly due to its weak performance in recent years and partly because 2022 and 2023 are likely to be very unpleasant for most people on this planet.

However, recessions and other periods of bad news are usually the best times to buy, precisely because prices are low and yields are high.

Unilever will benefit from the easing of the raw material inflation which is partly due to the post-lockdown so called "bottleneck effect". This should easy in a relative short timeframe. I believe that the energy price will come down too, due to the fact that the spike in energy price was first seen at the easing of lockdowns around the world. War was a part contributor to the spike in energy price. The latter contributor to energy inflation has uncertain timelines. Definitely energy is undergoing a slow and profound change, in my view energy will not be as cheap as hydrocarbons for a good decade or two.
Interest rates are very hard to predict. I can't see govs rise them too much or the economy will melt down. I am convinced that lots of inflation is due to money printing rather than cheap borrowing. And that the excess of cash will not be recovered through taxes but will result in a general inflation. Money printing is a contributor to inflation that will never be mitigated. Interest rates have no place to increase significantly, not being a major player in the inflation we are seeing.
Unilever has to hold on dearly to its consumers, trying to avoid as much as possible to switch to cheaper alternatives or cheap stores. Although I can see a faint presence of UL products in discount shops.
Unilever share price should return to see better days, maybe in 2 years or so. Brokers seem to have a short term view.

Mr D please enlighten us as to the reasoning behind your £48 valuation.
What I see is a company that is being hit considerably by the state of the world economy, with a looming global recession on the horizon & with rising interest rates margins are being squeezed ever more, the BOD have acknowledged this & that is a concern.
I agree that ULVR's market valuation is now down below the long-term average but IMO this reflects the market's uncertainty more than anything else. £48 per share is nowhere near coming, I would think £30 - £32 per share is about right if we do enter recession & interest rates go to where they may do. Hold for divi's unless these are cut.

My estimate of fair value is about £48, so reasonable upside from the current £35. And if the market thinks £35 is fair value, then I'm happy to take the 4% yield instead.