This sleepy FTSE 100 company may soon wake up and this is why I’d invest now

Bryan Williams outlines some of the growth drivers for Johnson Matthey plc (LON:JMAT).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Being a constituent of the FTSE 100, many investors give consideration to taking a stake in Johnson Matthey (LSE: JMAT). However, I’m sure a cursory review of the recent price action and revenue figures elicits a giant yawn from most investors.

Back in 2014, the share price was around 3190p… and today it’s also around 3190p! The income in 2014 was £11.15bn and the latest figures for 2019 actually show a fall in revenue to £10.75bn – hardly attention grabbing…

The future promise

As I see it, the fortunes for Johnson Matthey now look set to perk up quite a bit. The cornerstone for this upbeat assessment is a product line known as eLON, which represents a range of state-of-the-art lithium battery materials.

The prospects for the lithium battery sector continues to shine, with demand from companies that produce electric cars, laptops and other high-tech devices expected to soar over the coming decades.

An early signal of a brighter future was given in the most up-to-date annual report. Robert MacLeod, Chief Executive, reported a more-than-healthy increase of 17% in its “New Markets” segment, which includes eLON.

Also encouraging was the recent five-year agreement with Lithium Werks, a leading battery producer, to supply the eLON range for the next generation of Lithium Werks’ products. To give some idea of the scale of the opportunity, this relatively new private company has supplied in excess of 200 million batteries to more than 200 customers since its inception in 2017.

There is another segment of Johnson Matthey’s business showing continuing signs of an uptick in revenue. For its world-beating clean air catalytic converters, there was a rise of 11% in revenues. This despite a decline in automobile production, which surely highlights JMAT’s market-leading position.

A spur for further growth of the converter business comes in the form of clean air legislation to be enforced in China and India in the very near future. In advance of the legislation, Johnson Matthey is investing for growth by building production facilities locally in order to satisfy the impending demand.

Bargain territory

Given the potential for an improvement in both revenue and profits, the price-to-earnings ratio is a mere 13.1 – certainly not overvalued!

Also noteworthy is the fact that although there has been a rather lacklustre performance on the revenue front, investors have been treated to a consistently rising dividend. From 72.2p a share in 2014, the dividend is now 85.5p, representing an average increase in the dividend of around 3.7% a year. The present dividend, at the current share price, represents a yield of 2.8%.

In short

Johnson Matthey is on the threshold of a marked improvement in earnings and, right now, the price of its shares is not excessive. If Johnson Matthey interests you, it’s not the only British industrial set for growth in the near future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bryan has no position in any company mentioned in this article. 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.

More on Investing Articles

Man changing battery on electric bicycle
Investing Articles

Prediction: in 12 months the sizzling National Grid share price could turn £10,000 into…

It's been another solid year for the National Grid share price and the dividend yield is decent too. So why…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

Up 185% in 3 years, why does the market love this FTSE 250 stock

Over the past three years, this stock has vastly outperformed the FTSE 250. Dr James Fox takes a closer look…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing Articles

Looking for growth, dividends, or value? These 3 ETFs could be smart ideas to consider

Exchange-traded funds (ETFs) provide a way for investors to spread risk without sacrificing the possibility of huge long-term returns.

Read more »

Happy couple showing relief at news
Investing Articles

Is the Rolls-Royce share price fast becoming a joke?

The FTSE 100 engineering titan has done brilliantly in recent years. But our writer wonders whether the Rolls-Royce share price…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

Is there a ‘best age’ to start buying shares?

Christopher Ruane weighs some possible pros and cons of waiting to start buying shares for the first time, versus starting…

Read more »

piggy bank, searching with binoculars
Investing Articles

Is it time to look again at the FTSE 250’s worst performers?

Our writer considers the prospects for two of the worst-performing shares on the FTSE 250, with falls of at least…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing For Beginners

Down over 40% in the past year, I think investors should consider these value shares

Jon Smith points out two value shares that have fallen heavily over the past year but are starting to look…

Read more »

Fans of Warren Buffett taking his photo
Growth Shares

3 principles from Warren Buffett that could help turn an investor into an ISA millionaire

Jon Smith explains some of the key strategies that Warren Buffett has used over time to generate strong returns from…

Read more »