Why I’d buy shares in this growing, dividend-paying AIM company
When it comes to AIM (formerly known as the Alternative Investment Market), the opportunities to lose money are numerous. Thankfully for well-informed investors, the market does provide opportunities to invest in companies with huge growth potential. Often seeking out companies that already pay a dividend is a shortcut to finding the better stocks.
Abcam(LSE: ABC) is a great example of a successful and profitable AIM company. It provides the tools needed by life science researchers across the globe, and it’s a market leader in the field.
The company’s upward share price trajectory was recently abruptly reversed. Alongside results, it stated that its profit forecast for the new financial year will be “well below” expectations.
That’s always a catalyst for an immediate share price fall. Abcam was no exception. However, it may also provide a perfect entry point for picking up the stock at a cheaper price.
Providing the right ingredients for growth
Being a supplier to the life science market is a fundamentally attractive market to be in, with high margins, a global marketplace and significant barriers to entry. Abcam enjoys and profits from established relationships and reliance on its expertise to help researchers in the industry with their work.
The company has certainly made the most of its position within the market, and rewarded shareholders with a share price that had been rapidly climbing consistently for several years.
Despite the warning on expectations, the company’s results were actually pretty good and analysts have not rushed to downgrade the stock, which is a reassuring sign. The preliminary results for the year ended 30 June saw revenue up 7.4% on the previous year at £233.2m, EBITDA up 15.9% at £81.7m and profit before tax growing 33.1% to £69.1m.
As a dividend-paying AIM stock Abcam should continue to reward its investors, and already the share price is starting to recover from its recent plummet.
Another AIM success
Boohoo(LSE: BOO), the fast fashion retailer, is another AIM success story and has seen its share price rise even more quickly than Abcam’s since it listed on the stock exchange. This week the company announced the appointment of Primark’s chief operating officer, John Lyttle, for the role of chief executive. He’ll start in March 2019, which should boost growth and the share price in my opinion.
The latest results from Boohoo back in June saw it posting a 53% jump in first-quarter revenue. In the three months to the end of May, total group revenue rose to £183.6m from £120.1m the year before.
Investors will also have been buoyed by the strong performances from the group’s other brands, PrettyLittleThing and Nasty Gal. Their revenues grew by 158% and 149% to £79.2m and £7.2m, respectively.
When it comes to finding AIM stocks that will enhance your wealth, it can be tricky. Boohoo and Abcam, however, are both established companies with strong growth potential.
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Andy Ross does not have a position in any of the companies mentioned in this article. The Motley Fool UK has recommended boohoo group. 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.
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