Unilever Stock Analysis – Too Much Risk And Bad Management
Unilever stock analysis, uh. Unilever, the company with the delusional CEO that got his job in February of 2009 (best time to get a job) and then went around telling people how his returns (from 2009 to 2017) are better than Buffett’s and therefore Buffett has to stay away when it comes to Unilever. Fast forward two years, Unilever’s stock price is there were it was when Buffett made the offer that actually pushed the stock price higher by 30%.
Apart from the Buffett related saga, what is left is a behemoth business trying to grow and deliver returns to shareholders.
Unilever stock analysis – financials
However, over the past 10 years, there has been no growth in
revenue, no growth in operating and free cash flows. Thus, Unilever is not
really a compounder anymore. Perhaps it was in the past.
Earnings and dividends have been growing, but so have
liabilities and this is a big red flag. It means that the business is
leveraging itself up to pay dividends and do buybacks while the actually
business quality isn’t improving given that operating cash flow and free cash
flow doesn’t move. Earnings growth is there, but that can be conceived by a
high level of investments needed to keep up, a very dangerous divergence.
Plus, the number of shares was flat from 2009 to 2017, only
when the stock went up 3 times, only then the management decided to do large
buybacks and spend dozens of billions.
So, Unilever is a typical example of a company focused on its management and not on shareholders. They should have accepted Buffett’s offer, where they would have lost their jobs as 3G’s Segio Lehman would come in and cut costs everywhere. Since Buffett’s offer more than two and a half years ago, not much has happened except that I am sure the management god a lot of stock options.
Unilever’s PE ratio is around 15, but the company is leveraging itself up to deliver what it thinks it should deliver to shareholders. All of this can get ugly. Too much risk for me.
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