Tyman plc is a stock I'd buy and hold forever

Manufacturing components for doors and windows is hardly the world's most exciting job, but it can be lucrative as Tyman(LSE: TYMN) has demonstrated over the past five years. Indeed, since mid-2012, shares in the company have returned a staggering 214% including dividends as earnings per share have risen by around 150%, and revenues have more than doubled.

And it looks as if this trend is going to continue. According to the results released today by the company for the six months ending 30 June, group revenue grew 2% year-on-year at constant currency and underlying profit before tax rose 4%. Including the impact of currency, revenue exploded by 30%, and underlying earnings per share grew 25% allowing the company to announce a 17% increase in its interim dividend.

On a statutory basis, profit before tax rose 130% year-on-year and basic earnings per share increased 113% year-on-year. The one bad mark against the company for the period is a 32% increase in net debt to £190m, but on a pro forma basis (after adjusting for several acquisitions), leverage actually declined year-on-year. For the company's full fiscal year, City analysts are expecting Tyman to report earnings per share growth of 26.5% and the shares are projected to yield 3.5%, although these forecasts could be on track for substantial revisions higher following today's news.

For example, analysts were only expecting a 10% increase in the company's dividend payout. Based on current city expectations, shares in the building materials producer are trading at a forward P/E of 12.2, which looks cheap compared to the company's current growth rate, but looks expensive if you believe the UK homebuilding market is about to collapse.

Diversification

Tyman's management is well aware of this risk and is working hard to diversify the group's interests into North America and Europe, a process which is already yielding results as today's numbers reveal. If management can continue to acquire attractive businesses at fair valuations and integrate successfully, as they have done over the past five years, then Tyman could have a huge runway for growth in front of it. It might pay off to invest in this growth story.

Cash cow

Science(LSE: SAG) looks to be another boring company with enormous potential. It provides scientific consultancy services and growth has been slow at the group. However, cash generation is strong, and management is working for shareholders by returning this cash to investors via buybacks.

At the end of June 2017, the company had gross cash of £26.3m, up from £17.2m in the year ago period. Profit before tax for the period was £2.3m, and revenue for the half was £18m, up from £17.7m last year.

With a healthy balance sheet, management is also looking for acquisition opportunities, and these could significantly increase the group's growth potential. With this being the case, even though the shares look expensive trading at a forward P/E of 17.5, it's clear Science can produce steady returns for investors going forward through both cash returns and bolt-on acquisitions.

Make money, not mistakes

These companies have all the hallmarks of future growth champions but you shouldn't just take my word for it as it always pays to do your own research before initiating a position.

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Rupert Hargreaves 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.

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