Colgate vs. Unilever: Which Consumer Goods Stock is a Better Buy?

NYSE: UL | Unilever PLC ADR News, Ratings, and Charts

UL – Every investor should have exposure to the consumer goods sector. This is even more true when rates are falling and growth is decelerating like now. Colgate-Palmolive Company (CL) and Unilever (UL) are two of the top stocks in the sector but which is the better buy? CL.

Consumer goods stocks deserve a place in every investor’s portfolio. These stocks are often boring but can be big outperformers in the long-term as they have consistent sales and pricing power.

 

Thus, they are less sensitive to economic fluctuations and often pay above-average dividends. Needless to say, the current environment of falling rates and growth expectations is a positive tailwind for these stocks.

 

Sort through the consumer goods stocks and you will find there are plenty of good prospects to pick from. Below, we provide a look at two of the sector’s stars in Colgate-Palmolive Company (CL) and Unilever (UL).
 
CL

CL makes toothpaste, toothbrushes, and other consumer products, most of which have natural ingredients. CL’s focus on emphasizing its Naturals line is paying considerable dividends as consumers continue to transition to products with all-natural and organic ingredients. It is particularly interesting to note CL has achieved a worldwide household penetration of more than 61%. This means 6 out of every 10 households in the United States use at least one CL product. As a result, CL raked in $16.5 billion in revenue this past year.

CL has a forward P/E ratio of 25.66. This is a slightly elevated ratio. However, CL has priced just below its 52-week high of $86.41 so the ratio is somewhat justified. CL’s merits include a low beta of 0.61 that indicates the stock will likely retain its value should the market get rocky.

CL has a B POWR Rating grade, meaning the stock is a Buy. CL has an A Quality component grade along with a B Stability component grade. The stock has Cs in the Sentiment and Growth components. You can find out how CL fares in the rest of the POWR Ratings components such as Momentum and Value by clicking here.

CL is ranked just outside of the top 10 in its space, slotting in at number 11 out of 73 stocks in the Consumer Goods category. Click here to find out more about the stocks in this sector.

CL has an average analyst target price of $86.44. If CL reaches this price, it will have increased by nearly 4%. The stock’s average analyst target price has increased more than $5 in the past 44 weeks.

UL

UL makes packaged and branded consumer goods ranging from personal care products to laundry detergent, food, etc. UL’s business even extends to specialty chemicals. Investors will be happy to know UL sells its goods to countries throughout the world.

UL has a forward P/E ratio of 19.23. This is a reasonable ratio though some will argue it is a bit high considering UL’s industry. The stock’s beta is 0.47, indicating it should retain the bulk of its value if the market tanks. It is worth noting UL pays a dividend of 3.62%.

UL has a C POWR Rating grade. The stock has a B Stability component grade along with Cs in the Growth, Value, and Sentiment components. Click here to find out how UL grades out in the Momentum and Quality components.

UL is ranked in the top 20 of its space, coming in at number 18 out of 73 publicly traded companies. You can learn more about the stocks in this sector by clicking here.

The analysts are pounding the table in favor of UL, setting an average target price of $66.52. If UL hits this price point, it will have popped by nearly 20%. The lowest analyst price target for UL is $50.71. The highest analyst target price for UL is $73.46.

Which is the Better Buy?

CL is the better buy simply because it has the superior POWR Rating grade. UL grades out as a C, meaning it is a Hold. However, there is the potential for it to be elevated to a B POWR Rating grade at some point in the future. Scoop up some shares of CL now, continue to check in on UL’s POWR Rating grade in the weeks and months ahead, and alter your investment strategy accordingly.


UL shares were trading at $56.57 per share on Wednesday afternoon, up $0.11 (+0.19%). Year-to-date, UL has declined -4.59%, versus a 18.30% rise in the benchmark S&P 500 index during the same period.


About the Author: Patrick Ryan


Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...


More Resources for the Stocks in this Article

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CLGet RatingGet RatingGet Rating

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