Unilever share Price and Graham value

Unilever has a high Return On Equity (book value) and thus it makes sense to pay a relatively high amount for the book value you get as a shareholder. 

Graham Defensive analysis:

SECTOR: [PASS] Unilever is neither a technology nor a financial Company, and therefore this methodology is applicable. 

SALES: [PASS]  The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Unilever's sales of €60 000 million, based on 2023 trailing 12 months, pass this test.

CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Unilever's current ratio €20 366m / €25 000 of 0.8 fails the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL]  For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for Unilever is €31 000 million, while the net current assets are - €4 634 million. Unilever fails this test.

LONG-TERM EPS GROWTH: PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for Unilever increased roughly 50% over the past 10 years, therefore the company passes this criterion. 

Earnings Yield: [PASS] The Earnings/Price (E/P) ratio, based on the lesser of the current Earnings Yield or the  yield using average earnings over the last 3 fiscal years, must be "sufficient", which this methodology states is greater than 6,6%. Stocks with higher Earning Yields are more defensive by nature. Unilever's E/P of 7,4% (using the current PE) passes this test. 

Graham Number: [FAIL]  The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Unilever has a book value of €7,7 per share, a Graham Number of €23 per share and fails this test.

Dividend: 1,71/44,3 = 3,8%

Conclusion 2019/2020/2021: The price seems reasonable, but not cheap enough for the Graham Defensive stock screen.  In December 2023 at EUR 44,3 it seems cheap.