Have £1,000 to invest? Morrisons is a FTSE 100 share that I’d buy and hold for the next 10 years
The recent performance of Morrisons (LSE: MRW) has been stunning. The company delivered its best quarterly sales performance in a decade in its most recent quarter, with the last couple of years showing a step-change in its growth prospects under its current strategy.
Looking ahead, the company could generate further sales and earnings growth over the long run. This could help it to outperform the FTSE 100, as well as many of its retail sector peers. As such, it could be worth buying alongside another growth share that reported positive results on Friday.
Improving outlook
The company in question is designer, developer and distributor of toys, games and giftware Character Group (LSE: CCT). The company released a trading update which showed that is has delivered a solid performance, and saw a return to growth in the second half of the year. Its UK business has delivered record sales, and this is set to mean that it comfortably meets expectations for the full year.
The company has seen strong demand from customers for its core ranges and new introductions. It is optimistic about its prospects for the autumn/winter trading period, including the key Christmas period.
Character Group is forecast to post a rise in earnings of 19% in the current year. This would be a strong result given the uncertainty which surrounds the UK economy, and especially the outlook for consumer confidence given the risks from Brexit. With the stock having a price-to-earnings growth (PEG) ratio of 0.6, it seems to offer a wide margin of safety. This could lead to high capital growth over the medium term, which may make it a worthwhile purchase at the present time.
Improving business
Morrisons also seems to be successfully navigating what continue to be uncertain prospects for the wider UK retail sector. As mentioned, its sales growth has been strong, and this trend could continue over the next few years. Its investment in the wholesale part of its business could make a significant impact on its overall financial performance. It continues to target £1bn in sales from its wholesale supply division, with it enabling the company to capitalise on the growth potential on offer within the convenience store sector.
Looking ahead, Morrisons is forecast to post a rise in earnings of 9% in each of the next two financial years. Given the challenging trading conditions it is facing, both from weak consumer confidence and strong competition in the supermarket sector, a high-single-digit earnings growth rate suggests that it has a resilient business model versus many of its peers that are struggling to post positive sales growth.
With the business focused on expanding its online presence and reducing debt levels ahead of potential interest rate rises, it seems to be in a strong position to perform well in the long run. As such, it could be a stock that is worth buying today, and holding for the long term.
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Peter Stephens owns shares of Morrisons. 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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