This share has been quietly making investors rich

You might think that a share delivering investors a 126% gain over the last two-and-a-half years would have a high valuation with an underlying business operating in some flashy high-growth sector.

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However, that's not the case with John Menzies(LSE: MNZS), which issued a positive trading update this morning. The firm has two arms to its business - newspaper and magazine distribution, and ground handling services in the aviation sector for passengers and cargo.

Positive change is afoot

Yet that could all be about to change in a way that enhances value for shareholders with the potential to boost the firm's ongoing prospects. Read on to find out more.

Everyday operations like this won't make you dizzy with excitement, but they could back a decent investment if you buy the firm's shares. Indeed, the firm's shareholders have done well up until now. Today's update reveals revenue growth of 12% in the aviation arm for the first four months of the year driven by a flow of ongoing contract wins, and decline in sales of 3.1% in the distribution business.

The firm is growing its aviation business both organically and through acquisitions and chairman Dr Dermot F Smurfit said in today's update: "Our aviation business continues to trade strongly. The opportunities that exist to cross-sell our new product lines and also to expand into new markets are very exciting and your board looks to the future with increasing confidence."

A plan to boost the firm's prospects

John Menzies' distribution arm looks like it is in decline, though. To put things in perspective, around 58% of operating profit came from the aviation arm last year with the rest from distribution. However, the company is working on a deal to combine the distribution business with the operations of DX Group, which could lead to John Menzies selling the distribution business for cash and the issue of DX shares to John Menzies shareholders.

If the deal goes through, John Menzies shareholders will stand to gain from any efficiencies and synergies that may flow from the enlarged distribution business while also having the option to sell their new DX shares if they want to. The potential deal looks interesting to me and will remove the drag from the underperforming distribution business, turning Menzies into a higher-growth beast powered by the aviation business alone. Change like that can often drive accelerating returns for shareholders.

A modest valuation

Meanwhile, City analysts following the firm predict earnings will swell by 13% both this year and again during 2018. At today's share price of 695p, the forward price-to-earnings ratio sits at just over 11 and the forward dividend yield is almost 3%. Those forward earnings should cover the payout almost three-and-a-half times, which is a decent level of cover from earnings suggesting the directors see opportunities to invest the firm's incoming cash flow into further growth.

Even though John Menzies' businesses have a lot of cyclicality inherent, I don't think this is a stretched valuation and could look cheap if the firm manages to transform itself by ditching the underperforming distribution division.

Strong performers

Picking firms with the potential to grow operations can be tricky but a change within the company, such as John Menzies' potential move out of its distribution business, sometimes leads to a good performance for investors.

I reckon John Menzies is attractive right now, but I am also keen on the dividend-paying firms highlighted in this special Motley Fool report. These big names are less cyclical and dividends look set to grow along with their share prices for years to come. You can get hold of a copy of this useful report by clicking here.

Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.