Big Yellow Group is one of the UK’s largest self-storage firms. It was founded in 1998 in the London area and has since grown organically. Businesses had to adapt to the changing habits of shopping quickly due to the pandemic. A stronger online presence requires distribution and storage solutions which is where Big Yellow Group comes in.
As I write, shares in BYG are trading for 1,567p. A year ago, shares were trading for 1,152p, which is a healthy return of 36%. Most of my best stocks to buy now have produced double-digit returns over the past 12 months.
Performance, growth, and valuation
At current levels, BYG shares sport a forward price-to-earnings ratio of 10 which is relatively cheap in my opinion. With growth plans and the recent e-commerce boom, the share price could rise and now could be a good time to buy shares cheap.
One of the key things I like about Big Yellow Group is its growth journey to date and plans moving forward. In 23 years, BYG has grown from a single unit in London to 102 sites across the UK. It also shows no sign of slowing down its growth and is on the lookout to open new sites in strategic locations. A recent announcement of a new 90,000 square foot site in Slough to open in 2023 is evidence of this.
Big Yellow Group has a positive track record of performance. I understand past performance is not a guarantee of the future but I use it as a gauge when reviewing investment viability. I can see that revenue and gross profit has increased year on year for the past four years. FY results for 2021 were impressive with an increase in revenue, profit, and free cash flow. This resulted in a dividend of 34p per share which was also up from 2020 levels. Regular dividend payments can make me a passive income, which is a bonus.
The best stocks to buy now have risks too
Despite my bullish stance towards Big Yellow Group, I must note credible risks. The e-commerce boom has seen an increased demand in services. BYG has competitors who are also looking to capitalise. There are other firms that have similar offerings and all are vying for business. Some others that spring to mind are Clipper Logistics and Warehouse REIT. These competitors could hamper BYG’s progress.
In addition to competitors, the BYG share price is trading at all-time highs. This means any negative news or lower-than-expected trading levels could see the share price drop significantly.
Overall I like Big Yellow Group for my portfolio and would add shares at current levels. I believe it is currently cheap and its share price will rise further. It has a good track record of recent and past performance and offers me a dividend to make a passive income. I believe it is one of the best stocks to buy now for my portfolio to capitalise on the e-commerce boom we are seeing.
Jabran Khan 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.