Over the long term, Unilever (LSE: ULVR) shares have been a fantastic investment. Not only have they produced very healthy capital gains, but they’ve also provided investors with a steady, growing stream of dividends. Here, I’m going to look at the investment case for Unilever shares today. Are they still worth buying? Let’s discuss. Unilever’s brand power is paying off Unilever’s most recent results, for the third quarter of 2022, showed that the business is performing reasonably well at the moment. For the period, the group reported underlying sales growth of 10.6%. On the back of this performance, it raised its sales guidance for the full year. One thing Unilever has going for it right now is brand power. Strong brands such as Dove, Domestos, and Hellmann’s have allowed it to raise its prices and offset inflation. In Q3, for example, the group raised its prices by a healthy 12.5% year on year. Another big plus is the nature of its products. People tend to buy its everyday products repeatedly, regardless of economic conditions. This leads to stable sales volumes during periods of economic weakness (like we have now). Having said that, if the global economy was to weaken further, we may see consumers downgrade to cheaper brands. This could hit sales. Further growth ahead Looking ahead, analysts expect Unilever to continue growing. For 2022 and 2023, revenues are expected to come in at €59.6bn and €61.3bn respectively, up from €52.4bn in 2021. Meanwhile, net profits are forecast to hit €6.6bn and €6.8bn for 2022 and 2023, versus €6bn in 2021. It’s worth noting here that Credit Suisse analysts expect most European consumer staple companies to enjoy margin expansion in 2023, as a result of lower input costs and further price hikes. They have an ‘outperform’ rating on Unilever shares with a price target of 4,800p – roughly 14% higher than the current share price. So, overall, the outlook for the business in the medium term appears to be relatively attractive. This is encouraging, from an investment perspective. Valuation and dividend yield What about the valuation though? Well, given current earnings estimates, Unilever shares have a forward-looking price-to-earnings (P/E) ratio of around 17.7 right now. That’s above the UK market average. However, it’s significantly lower than many rivals’ valuations. Coca-Cola, for example, currently has a P/E ratio of about 25 while Procter & Gamble has a P/E of 26. All things considered, I see the valuation as fair given Unilever’s excellent track record when it comes to generating shareholder wealth. Personally, I’d be comfortable buying the stock at that multiple. A dividend yield of around 3.6% adds weight to the investment case. Of course, there are risks to consider here. Changing consumer behaviours are one. There’s no guarantee Unilever’s brands will remain popular going forward. Debt on the balance sheet is another. At the end of June, net debt stood at €27.1bn. Overall however, I see appeal in Unilever shares today. I plan to buy some more shares for my own portfolio in the near future.
