Unilever’s share price is rising on positive results, but is the stock a decent investment now?

The fast-moving consumer goods giant Unilever (LSE:ULVR) released its third quarter update today (24 October) and the share price is on the rise.

As I write, it’s up about 4%. But it’s worth setting the move in the context of the stock’s long-term recovery that began in April.

It appears that business is well and truly out of trouble after weak earnings in 2022 and 2023, and a withering stock chart.

Sales and volumes up

In the third quarter of 2024, the company achieved sales growth of 4.5%, with a volume increase of 3.6%.

Chief executive Hein Schumacher received the fourth quarter in a row “better, improved volume growth”. That result is driven by all of the company’s business groups posting higher numbers year after year.

To me, that year of progress feels like it could be the start of a great new trend in business that is likely to endure for a long time.

In the past, the cost of living crisis and other challenges in the global economy have made previously loyal customers look for cheaper alternatives. On top of that, rising costs had eaten away at profit margins.

For a while, as share prices and earnings flagged, it began to look as if the ‘spell’ had been broken. Perhaps those rock-solid forms of the company could no longer support stable cash flow and dividends for a long time.

However, due to the general economic challenges of the recession, Unilever’s business has come roaring back. So I’m willing to believe that the company’s power products haven’t lost their magic after all. Indeed, such words A dove, Comfort, This is Hellmann’s place, Knorr and some may be as strong as before.

But there are risks for shareholders, as we have seen. Any future macroeconomic disruptions may further hamper the company’s ability to maintain sales, leading to a decline in the share price.

The next high performance?

Looking ahead, Schumacher said Unilever is in the early stages of transforming its operations through a Growth Action Plan. The step is aimed at “doing fewer things, better and more impactful”.

That sounds like music to my ears. I’ve found that simplicity is always the most effective way to manage my business over the past few years. Schumacher thinks Unilever is getting good results from a few big new launches in all its markets, supported by increased brand investment.

In two examples of change, the company’s performance “total production system” and working to diversify its ice cream business.

Schumacher says Unilever is on track to meet its 2024 requirements and become a company. “a very good business” over time. Meanwhile City analysts expect average wages to rise by around 9% this year and around 7% by 2025.

Set against expectations and a price close to 4,840p, the forward price-to-earnings (P/E) ratio is just under 19 in 2025. Meanwhile, the expected yield is around 3.3%.

I agree that is not a bargain-bin valuation, but this is not a bargain-bin business either.

For me, Unilever is a potential long-term investment. So I keep a close eye on it at the right times when the markets are weak.