Three Things to Love About Reckitt Benckiser Group Plc (RB)

LONDON — There are things to love and loathe about most companies. Today, I’ll tell you about three things to love about Reckitt Benckiser Group Plc (LON:RB). I’ll also discuss whether these positive factors make this FTSE 100 household-goods giant a worthy investment today.

Emerging markets
Unilever plc (LON:ULVR) — with which Reckitt is often compared — is considered an emerging-markets company par excellence. It’s certainly true: Unilever generated 55% of group turnover from emerging markets last year.

Unilever N.V. (ADR) (NYSE:UN)

However, Reckitt Benckiser Group Plc (LON:RB) is also making impressive headway in these fast-growing economies. Last year, emerging markets accounted for 44% of core net revenue (excluding pharmaceuticals and food), and the company said it expects this to rise to 50% by 2015, a year earlier than previously targeted.

Margins
Reckitt’s profit margins are much superior to Unilever’s; in other words, Reckitt earns more profit on every £1 of turnover. Admittedly, Reckitt’s margins are boosted by its pharmaceuticals business, but even leaving that division aside, operating margin is 23% compared with Unilever’s 14%.

Historically, Unilever’s operating margin has been stuck at about 14% for at least seven years. Reckitt Benckiser Group Plc (LON:RB)’s overall margin has increased steadily from 20% to 26% over the same period.

Smart acquisitions
Reckitt has a terrific record of making value-enhancing acquisitions: Boots Group’s over-the-counter medicines (including Nurofen, Strepsils, and Clearasil) for £1.9 billion in 2006, Adams Respiratory Therapeutics (owner of Mucinex, the No. 1 cough remedy in the U.S.) for $2.3 billion in 2008, and SSL International (owner of the Durex and Scholl brands) for £2.5 billion in 2010 have all proved to be excellent purchases by Reckitt.

If history is anything to go by, shareholders can look forward to a further uplift in Reckitt’s value as the benefits feed through from the company’s more recent acquisitions, which include Schiff Nutrition — a U.S. manufacturer of vitamins and nutritional supplements — for $1.4 billion.

A good investment?
I think both Reckitt and Unilever are great businesses. Let’s take a quick look at valuation. At a share price of 4,746 pence, Reckitt is trading for 17.7 times forecast earnings for 2013, compared to Unilever’s 18.8 multiple.

On that basis, Reckitt Benckiser Group Plc (LON:RB) looks the better value of the two. However, analysts reckon Unilever has somewhat better earnings-growth prospects for the immediate future, so there is perhaps not too much to choose between the companies.

Putting Reckitt Benckiser Group Plc (LON:RB)’s valuation into a broader context, it’s currently rated more highly than the average FTSE 100 company, but I think this top-quality business merits the premium.

The article 3 Things to Love About Reckitt Benckiser originally appeared on Fool.com.

G. A. Chester has no position in any stocks mentioned. The Motley Fool recommends Reckitt Benckiser Group and Unilever.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!