Unilever PLC (UL)

Total return at 5 years: 7.9%/year = 4.6% appreciation + 3.3% dividend. The target price ($79) is ex-dividend; the $11 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $89 · Multiples $73) exceeds the market price ($63).

Today — fairly valued: at $63 trades ~14.0% below its value discounted to today (~$73); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($79) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$47.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($63) is taken as given and it solves for what annual owner-earnings growth would need to hold for 10 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-0.2%/year) than we project (4.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~€5.5 bn of owner earnings in year 10 (vs ~€8.4 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on Utilidad neta atribuible normalizada (P/E). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Unilever files an annual Form 20-F and publishes its half-years on 6-K with no tagged data, so the model's year 0 is the fiscal year ended 31 December 2025 and not a rolling twelve-month window: it is the method's annual reporter convention. The entire fundamental apparatus —revenue, margins, earnings, capital and dividend per share— is in euros, which is the reporting currency; the quotation price is in dollars and the conversion happens only once, at the close of the waterfall, at the live exchange rate. The model's anchor market capitalization (€120.65 billion) is the quotation price taken to euros at the rate of €1 = US$1.167 that the half-year report itself declares as the average for the first half of 2026. Normalization of year 0, declared because the whole path hangs on it: attributable earnings in the structured file for 2025 are €9,469 million, and that number includes the accounting gain on the spin-off of the ice cream business, completed on 6 December 2025 and presented as a discontinued operation. Recurring earnings come from the income statement itself and cross-foot exactly: pre-tax income €8,693 million less taxes €2,481 million less non-controlling interest €542 million = €5,670 million, which on 2,195.3 million diluted shares equals the diluted earnings per share of €2.59 the company declares. That is the model's year 0. The non-controlling interest is already deducted: earnings attributable to Unilever shareholders are valued and it is not deducted again. The revenue path starts from current guidance and not from the reported trajectory. The structured file's trajectory (−14.0%, +1.5%, −3.8%) mixes the re-presentation for the ice cream spin-off with a very strong adverse currency headwind, so it is not extrapolable. The company raised its outlook on 28 July 2026: underlying sales growth of 4% to 6% for the full year with around 3% volume, 4% to 5% in the second half led by price, and a modest improvement in the underlying operating margin against the 20.0% of 2025. The first half delivered 4.8% underlying growth with 4.2% volume, but barely +0.5% of reported turnover: the gap is currency and divestitures. The base case models that gap closing gradually —+1.5% reported in the first year and convergence toward 4%— rather than assuming the headwind persists indefinitely, which would bake conservatism into the base. The shape is trough and recovery, not a monotonic deceleration, and it is declared as such. The model counts shares that fall rather than accumulating cash: the revealed net reduction is around 1.25% a year (2,559.8 to 2,195.3 million between 2022 and 2025) and the company has committed €6,000 million of buybacks between 2026 and 2029, partly with the proceeds of the separation of the food business. The share path is a single one for all three scenarios, because it comes from a single observed history. The surplus is imputed only once, through that channel, and cash stays flat. What the model does not incorporate, and is declared: the combination of the food business with McCormick, announced in March 2026 and with closing expected by mid-2027 at the latest. Food contributes around a quarter of turnover; the valuation is of the current, ongoing perimeter, with no premium or synergies.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $79 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $63, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $79 in 5 years plus $11 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $73. Against the current market price ($63), the margin of safety is 14.0% (trades below the maximum → there is margin) and the total return at that price would be 7.9% annually.

• Entry multiple. 21× on recurring earnings, below the manufacturers of higher perceived quality.
• Dividend yield. 3.3% on the current quarterly dividend of €0.4664 per share, up 3.0% against the same quarter of 2025.
• Estimated total return. +8% annually over five years, with +5% of appreciation and +3% of dividends.
• Dependence on the exit multiple. The exit multiple is 18.5 times against an entry of 21×: the return does not rest on a multiple re-rating.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (109%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. 15.4% against the 10% bar, on a capital base that carries decades of acquisitions in goodwill.
• Predictable cash generation. Operating cash flow of €8,350 million in 2025 and reported free cash flow of €5,900 million, with 100% conversion of earnings.
• Reinvestment runway. Limited: capex is 2.8% of turnover and growth is largely bought through bolt-on acquisitions.
• Accounting distortions. The 2025 earnings figure in the structured filing includes the gain on the ice cream spin-off; the model excludes it and works on the recurring figure.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Unilever's revenue engine is volume times price, and the company publishes it separately by category under the underlying sales growth measure, which excludes foreign exchange, acquisitions and divestitures, and price effects above 26% a year in hyperinflationary economies. Looking only at reported turnover in euros leads to the opposite conclusion from the business: in 2025 it fell 3.8% while underlying growth was 3.5%. The figures above are in euros, the reporting currency, not the quoted currency.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-dic-2025): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Underlying growth. 3.5% in 2025 and 4.8% in the first half of 2026, within the multi-year guided range of 4% to 6%.
• Mix quality. Volume took the lead over price: 4.2 of 4.8 points in the half, and 5.5 points in the second quarter.
• Reported turnover. Fell 3.8% in 2025 and grew 0.5% in the half: foreign exchange and divestitures dilute in euros what grows in volume.
• Emerging markets runway. India, Indonesia and Latin America returned to strong growth after the operational corrections of 2025.

• Recurrence and predictability. Consumer product used daily in 190 countries; 3.7 billion people use its products every day.
• Differentiated product. Brand with sustained advertising investment, though facing retailer private label in the lower-margin categories.
• Pricing power. Partial and uneven: Personal Care raised price 3.6 points in 2025, Home Care only 0.4.
• Operating leverage. Gross margin of 46.9% and underlying operating margin of 20.0% sustained while reported turnover was falling.
• Behavior in recessions. Defensive staples categories by nature, with a shift toward private label as a counterweight.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✓Interest coverage (EBIT / interest)26.3x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 109% of ROIC
• ✓Value creation (ROIC − 10% bar)+5pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.1x
• –Float / working capitalNeutral WC
• –Dilution (SBC % of revenue + shares)no data

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Gross debt of €28,278 million against cash of €3,941 million and operating income of €9,037 million.
• Interest coverage. Net financial costs of €344 million against €9,037 million of operating income: twenty-six times.
• Cash conversion. Operating cash flow of €8,350 million on recurring earnings of €5,670 million: earnings are backed by cash.
• Credit rating. The company states it targets a minimum of A or A2 and expects financial costs below 3% of average net debt.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Fiscal 2025 allocation: capex of €1,417 million, and €6,000 million returned to shareholders between dividends and the €1,500 million buyback completed in May. The complementary acquisition and divestiture offset each other during the year, so they do not appear as a net use of capital.

• Capital allocation. Ice cream spin-off completed, food separation agreed and productivity program finished ahead of schedule: right direction, results not yet verifiable.
• Shareholder return. €6,000 million returned in 2025 between dividends and buybacks, with a further €6,000 million of buybacks committed through 2029.
• Equity alignment. Not documentable: the issuer files Form 20-F and does not file a DEF 14A proxy statement, which is the source for share ownership.
• Candor in communication. Publishes volume and price separately by category and discloses which risks it sees increasing, including those working against it.

• Missing buyers from a reading of reported turnover: it fell 3.8% in euros in 2025 and grew just 0.5% in the first half of 2026, while underlying growth was 3.5% and 4.8% respectively. A screen that looks at the reported top line filters the company out before reaching the volume-and-price mix.
• Perimeter complexity: between the December 2025 ice cream spin-off, the restatement of all comparatives, and the ongoing food separation, the historical series is not comparable with itself. A business whose series cannot be read straight through loses coverage and attention.
• The entire staples category trades at a discount to its own history, on the perception that retailer private label is eroding brand demand.
• The price also incorporates expectations about the combination of the food business with McCormick, which has not yet closed: that is a source of price that is not the ongoing business, and is disclosed as such.

The McCormick combination is a transaction in which Unilever separates a business of its own, not one in which Unilever is the acquired company: its stock does not carry a control premium on its own shares. Closing is expected by mid-2027 at the latest and depends on McCormick shareholder approval, regulatory approvals and consultation with works councils. This valuation covers the current, ongoing perimeter, with no premium or synergies.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +2%/year (+10% total): the margin of safety protects the downside. The bull (+13%/year, +83% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Pricing lever. In Home Care price contributes 0.2 points with volume growing 7.4: growth may be being bought by giving back price.
• Pending transaction. The combination of the food business with McCormick closes by mid-2027 at the latest and depends on third-party approvals.
• Currency exposure. More than half of turnover comes from emerging markets and value is generated in euros against a price in dollars.
• Retailer private label. Competes head-on in Home Care, the group's lowest-margin category, at 13.1% operating margin.
• Transformation load. Three simultaneous programs: post-spin-off integration, productivity and digital transformation of core processes.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 15% above the 10% bar, but the margin is limited (+14%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 4% at a PEG of 5.3 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 7% (EBIT/EV) + ROIC 15% → brushes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -0% vs our 4%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -2%/yr, bull-scenario ceiling +10%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, cost advantage → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -0%, within what we project (4%) — the story squares with the numbers.