Unilever (LON:ULVR) and British American Tobacco (LON:BATS) are both large-cap consumer defensive companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, dividends, risk, profitability, analyst recommendations and institutional ownership.
Earnings and Valuation
This table compares Unilever and British American Tobacco's gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Unilever | N/A | N/A | N/A | GBX 252.70 | 14.77 |
British American Tobacco | £25.78 billion | 2.21 | N/A | GBX 278.90 | 8.91 |
British American Tobacco is trading at a lower price-to-earnings ratio than Unilever, indicating that it is currently the more affordable of the two stocks.
Dividends
Unilever pays an annual dividend of GBX 1.62 per share and has a dividend yield of 0.0%. British American Tobacco pays an annual dividend of GBX 1.54 per share and has a dividend yield of 0.1%. Unilever pays out 0.6% of its earnings in the form of a dividend. British American Tobacco pays out 0.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. British American Tobacco is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
This is a breakdown of current ratings and price targets for Unilever and British American Tobacco, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Unilever | 3 | 2 | 6 | 0 | 2.27 |
British American Tobacco | 1 | 1 | 12 | 0 | 2.79 |
Unilever presently has a consensus target price of GBX 4,708.18, indicating a potential upside of 26.12%. British American Tobacco has a consensus target price of GBX 3,495.17, indicating a potential upside of 40.62%. Given British American Tobacco's stronger consensus rating and higher probable upside, analysts plainly believe British American Tobacco is more favorable than Unilever.
Profitability
This table compares Unilever and British American Tobacco's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Unilever | N/A | N/A | N/A |
British American Tobacco | N/A | N/A | N/A |
Summary
British American Tobacco beats Unilever on 7 of the 8 factors compared between the two stocks.