This FTSE 100 share has soared 33% in 3 months. Would I buy it today?

This ‘boring’ FTSE 100 share has surged by a third in the past three months. With this stock trading close to all-time highs, would I still buy it today?

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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.

Journalists call this time of year ‘the silly season’. During the summer, UK newspapers carry unimportant stories, largely because politicians are on holiday. Likewise, stock markets often experience summer lulls. These are caused by lower trading volumes, lower liquidity, and higher volatility. Thus, the FTSE 100 has added just 35 points (0.5%) since 1 June. But not all Footsie stocks have marked time recently. This share has been surging since June…

Croda: a British success story

FTSE 100 share Croda International (LSE: CRDA) has been on a roll in 2021. Founded in 1925, Croda makes speciality chemicals to sell globally. Some of the world’s biggest and most successful brands use its high-performance ingredients and technologies. Based in Snaith, East Yorkshire, Croda has customers across the world and employs over 4,000 employees across 19 manufacturing sites and offices in 35+ countries.

Croda first listed in London in 1964 and is a member of the FTSE 100. The company’s moniker comes from its founders’ names: George William Crowe and Henry James Dawe. It makes chemicals for a diverse range of products, such as health and beauty, engine lubricants, and plastics. Croda’s core markets include Crop Care, Energy Technologies, Geo Technologies, Health Care, Home Care, Industrial Chemicals, Lubricants, Personal Care, and Smart Materials.

This FTSE 100 share leaps 33% in three months

Currently, Croda shares stand at 9,104p, up 54p (0.6%) today, valuing the group at £12.7bn. The current price is just 254p (2.7%) below the stock’s record high of 9,358p, set three days ago. However, this FTSE 100 stock is 3,334p (+57.8%) above its 52-week low of 5,770p, set on 4 September 2020. This stock has widely outperformed the FTSE 100 — here’s how it has performed over various timescales:

1 week +1.3%
1 month +9.5%
3 months +32.7%
6 months +45.0%
1 year +49.9%
2 years +97.6%
3 years +76.4%
5 years +169.2%

As you can see, this FTSE 100 stock has generated positive returns over all eight periods. Furthermore, despite the silly season, Croda stock has leapt by almost a third (+32.7%) in the past three months. It’s also surged by almost half (+49.9%) over the past year. Therefore, anyone who bought this Footsie share since mid-2016 is probably sitting on decent paper profits. Nice.

For me, Croda is highly priced

One reason why Croda shares trade close to all-time highs is that the company produces ingredients used in Covid-19 vaccines. These sales exceeded $100m (£72m) in Croda’s latest half-year results, leading to adjusted profit doubling in its Life Sciences division. In the half-year to 30 June 2021, Croda’s total sales rose by almost two-fifths (+38.8%) to £934m. Adjusted profit before tax leapt by over half (+50.5%) to £229.5m. As a result, adjusted earnings per share soared by almost two-fifths (+39.6%) to 124p. Also, the FTSE 100 firm lifted its interim dividend by more than a tenth (+10.1%) to 43.5p.

Although Croda’s management is bullish and expects profits to continue beating expectations, I see this share as fully valued. At the current share price of 9,104p, Croda shares trade on a bumper price-to-earnings ratio of 50.4 and a lowly earnings yield of 2.0%. Their dividend yield of 1.0% is much below the FTSE 100’s forecast yield of 3.7% for 2021. Croda is an excellent British business that has expanded strongly through organic growth and acquisitions. I don’t own Croda stock, but I’d have loved to buy it when the shares were trading around £50 to £60. However, at its current pumped-up share price, this go-go growth stock isn’t for me as a veteran value investor!

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 considered so you should consider taking independent financial advice.

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International. 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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