Since the turn of the year, shares in Unilever(LSE: ULVR) have outperformed the FTSE 100 by around 10%. This may lead many investors to speculate that Unilever's share price is set for a fall - especially since the slowdown in China could cause investor sentiment towards emerging markets-focused stocks such as Unilever to decline.
However, Unilever continues to have significant long-term growth potential. China is forecast to increase its consumption of consumer goods at a rapid rate and this bodes well for Unilever's top and bottom lines. Furthermore, Unilever has exposure to a wide range of markets so that if one geographic region disappoints, it has a number of others that can pick up the slack.
With Unilever forecast to increase its earnings by 8% next year, it appears to be in a strong position to record further capital gains over the medium term. Certainly, its price-to-earnings (P/E) ratio of 22 is hardly cheap, but given its defensive growth profile this seems to be a fair price to pay.
Stability in uncertain times?
Likewise, British American Tobacco(LSE: BATS) has outperformed the wider index by over 13% year-to-date. A key reason for this is the defensive appeal of tobacco companies, with their bottom lines being largely unaffected by the macroeconomic outlook. And with uncertainty likely to rise in the coming months as the US election moves closer and US interest rate hikes are on the horizon, British American Tobacco could become even more popular among fearful investors.
With British American Tobacco trading on a P/E ratio of 18.3, it seems to offer good value for money when compared to a number of its consumer goods peers. And with the company's bottom line forecast to rise by 12% this year and by a further 8% next year, there's scope for a rating expansion over the medium term. Plus, with e-cigarettes being a fast-growing space for British American Tobacco, there's potential for even higher rates of profit growth over the coming years.
Challenge in biggest market
Meanwhile, PZ Cussons(LSE: PZC) continues to experience challenging trading conditions in its key market of Nigeria. As today's full-year update showed, Nigeria continues to struggle with inflationary pressures and with it making up a quarter of PZ Cussons' total profit, it's offsetting the strong performance from its European and Asia-focused operations.
With it trading on a P/E ratio of 19.1, it seems to be rather expensive given the challenges in its key market. Certainly, there's excellent long-term growth potential from Nigeria and PZ Cussons is exceptionally well-placed to benefit from this. But in the meantime there could be further disappointment to come, which makes Unilever and British American Tobacco superior buys for long-term investors.
Of course, this doesn't mean that PZ Cussons is about to experience a colossal correction, but it does mean investors may wish to seek out a wider margin of safety before buying a slice of the business.
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Peter Stephens owns shares of British American Tobacco and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK owns shares of PZ Cussons. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.