Should I Buy Reckitt Benckiser?

LONDON -- It's time to go shopping for shares again, but where to start? There are loads of great stocks to choose from, and I've got my wallet out. So here's the question I'm asking right now. Should I buy Reckitt Benckiser  (LSE: RB  ) ?

Trolley dolly
Multinational household goods giant Reckitt Benckiser has never been on my shopping list. For some reason, it has never caught my eye. You could say the same about its lengthy list of consumer brands, such as Air Wick, Clearasil, Calgon, Dettol, Harpic, Nurofen, Strepsils, and Vanish. They're not glamour buys, yet we pop those into our trolleys without thinking, week after week. So should I take Reckitt Benckiser to the checkout?

Time to clean up?
It's the winter flu season and I've been doing my bit to boost sales of Nurofen and Strepsils. At last count, I had seven Reckitt Benckiser products in my home (which is seven more than I will ever buy from, say, Burberry). The wider market appreciates the value of its everyday brands, and the company's share price has risen 25% in the last six months to 42 pounds. That means it no longer looks cheap, by conventional standards, trading on a price-to-earnings ratio of 17 times earnings. But is it good value?

No headaches here
Reckitt Benckiser's third-quarter results, published in October, showed growth in all its core areas. It did particularly well in emerging markets and also posted performance improvements in its combined European and North American division. Some of its brands boast admirable defensive qualities, like the aforementioned Nurofen, which is hardly surprising in this headache-inducing recession. Reckitt Benckiser also has a pharmaceutical business, and that also did well, with currency-adjusted sales rising 6%, and strong volume growth in the U.S. Management hailed "encouraging results," and reckoned it was on target to hit its full-year 2012 sales target. The stock market was happy, and the share price instantly leapt 5%.

Battle of the brands
Reckitt Benckiser faces stiff competition in Europe, against established rivals such as fellow consumer goods giant Unilever, which also boasts a spread of everyday essentials such as Vaseline, PG Tips, Cif, Domestos, Surf, and Sunlight. Both companies are making a pitch at emerging markets and it should be fascinating to watch them slug it out overseas before an audience of billions of consumers. Interestingly, both stocks trade on high valuations, with Unilever on a P/E of around 18.5 times earnings. That makes them look expensive, until you examine what you are buying. Solid brands, solid growth and a solid yield (although Reckitt Benckiser's yield isn't spectacular, at 3% covered two times). Its forecast earnings-per-share growth isn't spectacular, either, on a forecast 3% and 6% over the next two years. But then, this isn't meant to be a spectacular stock. This solid, part-family owned business aims to deliver the (household) goods, year after year. And it has certainly done that. Reckitt Benckiser prides itself on delivering value for money to the consumer. It also looks good value for investors. Although right now, I wouldn't call it great value.

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