Every investor loves a multi-bagger, and here are two of my favourites. They may not operate in the most glamorous industries, but their growth rates make them stars nonetheless.
Thanks a Bunzl
Shares in global distribution and outsourcing group Bunzl(LSE: BNZL) have more than quadrupled since the financial crisis, from around 500p in the summer of 2009 to 2,290p today. It has also served up plenty of dividends as well, thanks to a progressive attitude towards increasing payouts.
Bunzl supplies its global business customers with food services, cleaning and hygiene, retail, grocery and safety equipment packaging. By taking on this humdrum everyday stuff it allows customers to focus on their core business, free up working capital and simplify internal administration.
The company is highly acquisitive, expanding its business by purchasing other companies in the same sector. In July it was back on the trail again, making a binding offer to buy a group of French businesses and also purchasing a marketing services business in the UK.
In June, Bunzl's half-yearly results announced the purchase of two further businesses in Canada and one in Spain. They showed group revenue rising 7% at constant exchange rates, with the improved underlying growth of between 3% and 4% as well, plus a similar impact from acquisitions. Revenue rose 12% at constant exchange rates, a figure that should be turbo-charged once you factor in the weaker pound.
Worth the price
Much of the revenue growth came from new business wins in the US towards late last year, although the price of securing this business was to accept lower margins. FTSE 100 listed Bunzl now has a market cap of £7.69bn, but its strong share price growth appears to have slowed for now.
The shares are trading roughly at the level they were a year ago, and I reckon recent stagnation could be an opportunity to buy. The stock may look a little expensive trading at 21.41 times earnings, but that is in line with recent valuations. The current yield is 1.81% and is more promising than it looks, given past progression.
Packaging company Smurfit Kappa(LSE: SKG) has performed even more impressively lately, its share price rising 400% in the past five years, boosted by the rapid growth in online shopping which has driven demand for its corrugated boxes and other paper packaging products.
The £5.5bn company joined the FTSE 100 last December and should continue to grow as it builds on its position as a market leader in Europe and Latin America, increasing sales, taking market share gains and meeting fast-rising demand from e-commerce companies. Right now it faces the headline of a double-digit increase in paper costs, although it seems management is taking this opportunity to renegotiate prices with customers.
Again, there are headwinds. Earnings per share are forecast to drop 6% in 2017 as profits dip, although they are expected to quickly rebound to rise 11% in 2018. By then, the stock should yield 3.3%. Surprisingly, this fast-growing company is trading at an affordable-looking 13 times earnings.
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Harvey Jones 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.