‘Undervalued’ is a relative term in the stock market. A stock cannot be called undervalued simply because its price or valuation multiple appears low. It is only undervalued relative to its intrinsic value, historical valuation, industry peers, growth prospects, or the broader market.
For example, a company trading at 12 times earnings may appear cheap compared with a peer trading at 20 times, but it may not be undervalued if its growth and profitability are significantly weaker.
Therefore, investors should always ask: undervalued relative to what? The answer depends on the benchmark, assumptions, and timeframe used to assess the company’s fair value.
With this in mind, let’s examine whether Hindustan Unilever (HUL) stock is undervalued. In doing so, we will compare it to its own one-year, three-year, and five-year median price-to-earnings (PE) multiples. We will also compare its PE to those of its peers and the indices in which it sits.
Readers should note that we are evaluating only a select set of valuation measures, and other factors must be taken into account. Valuation remains an imprecise science. Remember, valuation is not an exact science.
#1 Compared to historical PE patio
The decline in the PE from a median of 54.5 over five years to 42 at present shows investors are assigning lower valuation multiples to HUL stock compared to its history. So, based on its historical PE multiples, the stock is undervalued.
#2 Compared to peers
It’s always hard to compare HUL with its FMCG peers because it’s highly diversified giant, so the table above is not a straightforward apples-to-apples comparison.
In oral care, we need to compare it with Colgate; in beverages (tea and coffee) with Tata Consumer; in personal care (personal wash, hair colour) with Godrej, and so on. We could have included ITC, which owns Vivel, Aashirwaad and several other brands, but chose not to as the bulk of the company's profits still comes from cigarettes.
From the table above we can see that HUL is somewhere in between. It is more expensive than Emami, but Emami has far fewer product categories. As we said, a straightforward comparison of HUL with any FMCG company isn’t possible.
#3 Compared to indices
HUL is a part of the Nifty50, BSE Sensex, BSE 500, BSE FMCG Index, and others. Let’s see how their PE multiples compare.
HUL trades at PE of 42, a substantial premium to the BSE FMCG Index’s 32, and more than twice the Sensex or Nifty’s PE of around 20. This reflects HUL’s strong brands, distribution and earnings stability, but also shows that the stock remains relatively expensive.
Before we arrive at a conclusion, let’s find out about the company’s Q1FY27 results and management’s outlook.
HUL navigated market volatility through strict financial discipline across its balance sheet, delivering an Ebita margin of 23%, well within its guided range. Absolute Ebitda grew 8% year-on-year to ₹3,947 crore, while profit after tax (before exceptional items) rose 9% year-on-year to ₹2,731 crore. Growth momentum accelerated significantly from 3% in the first half of FY26 to 10% in Q1FY27.
Crucially, this expansion remains competitive, with the company continuing to gain turnover-weighted market share. According to management, the combination of accelerating top-line growth, healthy volume contributions, and expanding market share reinforces its confidence in building a resilient business for sustained, long-term growth.
The company’s supply-chain resilience proved a critical advantage during periods of volatility. By harnessing the scale of its global procurement network, the company ensured uninterrupted supply.
HUL’s portfolio strength was another key source of resilience in Q1FY27. According to management, with 50 brands in 15 categories across the price-benefit pyramid, the company is uniquely positioned to serve the diverse evolving needs of consumers. Leveraging its brand and portfolio strength, the company implemented targeted price hikes without eroding its customer base.
Despite cost pressures, HUL continued to invest in its brands to support long-term growth. During the quarter, the company increased its advertising and promotion spends sequentially to ₹1,657 crore, the highest in 11 quarters. It also continued to strengthen its omni-channel execution.
Conclusion
Purely on the metrics, HUL appears undervalued relative to its historical median PE ratio. While it trades at a premium compared to industry peers, its vast diversification means true like-for-like peers do not exist. Relative to benchmark indices, however, the stock continues to trade at an elevated valuation.
Investors should always evaluate a company's fundamentals, corporate governance, and stock valuations before an making investment decision.
Happy investing!
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com