While the FTSE 100 has fallen by 5.5% during the course of 2014, shares in Unilever (LSE: ULVR) (NYSE: UL.US) remain in the black. Indeed, they are up 0.5% year to date and, after a challenging start to the year when doubts surfaced regarding the sustainability of the emerging market growth story, sentiment in the global consumer goods company has picked up strongly.
However, there could be much more to come from Unilever and, in the long run, it could help you to retire rich. Heres how.
Although the European economy is struggling to post any kind of positive growth numbers right now, the developing world continues to offer companies such as Unilever tremendous growth potential. Indeed, as the populations of the emerging world increase in wealth, demand for premium consumables such as the upmarket shampoos, ice creams and cooking sauces that Unilever sells is likely to rise at a brisk pace.
This should ensure that Unilever delivers upbeat growth numbers over the medium to long term but, even in the near-term, the company has impressive prospects. For example, next year Unilever is expected to increase earnings by 9%, which is around 50% higher than the wider market growth rate. This shows that even when global economic growth is highly uncertain, Unilever can still deliver above-average earnings growth.
Of course, Unilever is hedging its bets. Europe and North America remain important regions for the company and this gives it a very broad global footprint, with it not being overly reliant upon one country or region. Certainly, the flip side to this is that the company is exposed to negative growth that is currently on offer in the Eurozone but, in the long run, such vast diversification should allow Unilever to post strong and yet relatively stable earnings numbers. In turn, this should help to deliver a less volatile experience for investors.
While Unilever trades on a valuation that may appear excessive, it owns a wide range of high-quality brands and seems well positioned to benefit from high levels of diversification and an emerging market tailwind. As such, it seems worth paying a price to earnings (P/E) ratio of 19.4 especially when Unilevers P/E has been well over 20 at times in recent years.
As a result, Unilever could continue to outperform the FTSE 100 in future years and make a major contribution to your prosperous retirement.
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Peter Stephens owns shares of Unilever. The Motley Fool UK owns shares of Unilever. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.