Are Unilever Shares Priced Right After CEO’s Bold Management Shake-Up?

If you hold Unilever or are considering a position, you might be wondering what comes next. This is a company many investors rely on for stability, yet the past year has brought its share of changes. Over the last twelve months, Unilever shares have dipped by 3.0%. Looking at a broader perspective, the stock is up 30.3% over three years and 16.7% in five years. This highlights that consistent performance can still be rewarding over time. The short-term chart presents a different picture, with a 2.9% drop in the last week and a modest 0.9% gain year-to-date.

What is driving these moves? Recently, the headlines have been filled with reports of strategic shifts. Unilever’s new CEO is initiating significant changes in leadership, including plans to replace a quarter of the company’s top 200 managers. There is also discussion of selling the healthy snack brand Graze, which signals a portfolio shift toward core categories such as personal care and beauty. At the same time, analysts are adjusting their price targets, though concerns about slower growth in key markets remain. These factors are influencing how investors assess the company’s risk and growth potential, and the stock's valuation is under more scrutiny than ever.

On our valuation scorecard, Unilever is considered undervalued on 2 out of 6 metrics, earning a value score of 2. Before making any quick decisions, it is important to examine the specific methods behind that score. Stay tuned until the end for an even more insightful way to assess what Unilever is truly worth.

Unilever scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Unilever Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company might be worth today by projecting its expected future free cash flows and discounting them back to their present value. For Unilever, this approach relies on forecasting both near-term and long-term free cash flows, then tallying them up with proper adjustments for time and risk.

According to Unilever’s financials, the company generated €6.6 Billion in Free Cash Flow over the last twelve months. Analyst projections extend through 2029, with free cash flow expected to reach nearly €9.6 Billion. After this period, further outlooks are extrapolated, and free cash flow is projected to continue rising in subsequent years. These projections anchor the valuation and reflect both analyst insights for the next five years as well as more moderate growth forecasts beyond that horizon.

After crunching the numbers using a two-stage Free Cash Flow to Equity model, the estimated fair value per share comes in at £54.28. Compared to the current share price, the DCF calculation suggests that Unilever stock is about 14.7% undervalued. This suggests the market may be underappreciating the company’s future cash-generating capability.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Unilever.

Our Discounted Cash Flow (DCF) analysis suggests Unilever is undervalued by 14.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Unilever Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is widely recognized as a suitable metric for valuing established, profitable companies like Unilever. It provides a simple way to gauge how much investors are willing to pay for each pound of earnings. For companies that consistently generate profits, the PE ratio offers a snapshot of market sentiment about growth prospects, profitability, and perceived risk.

Expectations for future growth and company-specific risks play a big role in determining what a "normal" or "fair" PE ratio should be. Faster earnings growth or lower risk can justify higher PE ratios. In contrast, slower growth or higher risk might mean a lower multiple is reasonable.

Currently, Unilever trades at a PE ratio of 24x. For context, this is just above the industry average of 23x for Personal Products and a bit below the average of its direct peers at 26x. While these comparisons are helpful, Simply Wall St's proprietary "Fair Ratio" refines the analysis by factoring in Unilever’s unique growth outlook, profit margins, industry position, market cap, and risk profile. This helps determine whether investors are getting enough value for the price they are paying, rather than simply relying on broad averages.

Unilever’s Fair Ratio is 21x. Since the current PE is modestly higher than this, it suggests the stock may be priced a little above its fair value on this basis.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Unilever Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, intuitive way to connect your view of a company's future to the numbers, tying together your expectations of Unilever’s growth, margins, and risks with a story that drives your estimate of fair value. Narratives bridge the gap between a company's story and the figures you see in its financial forecasts, allowing you to see how your beliefs or the market’s consensus shape valuation.

On Simply Wall St’s platform, Narratives are available within the Community page, making it easy for millions of investors to create, explore, and compare different perspectives. Narratives help guide investment decisions by dynamically comparing Fair Value (based on your story and assumptions) with the current share Price, continuously updating as new data or news arrives. For example, some investors believe Unilever’s push into premium personal care and emerging markets could justify a fair value as high as £59.26. More cautious investors see mounting competition and uneven growth pressing value down to £38.97, which demonstrates how powerful it can be to view stocks through your own lens.

Do you think there's more to the story for Unilever? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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