Here’s the best performing FTSE 100 stock of 2021. Should I buy now?

Jon Smith reveals the best-performing stock from the FTSE 100 this year, and weighs up whether the run can continue in 2022.

| 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.

One way that I can identify good stocks to buy is to eye up those that have momentum. For example, I can consider the best-performing stocks from this calendar year. At the top of the pile in the FTSE 100 is Ashtead Group (LSE:AHT). With an impressive one-year gain of 74%, momentum is clearly strong here. Should I buy now for further potential gains in 2022?

No frills, but strong results

Firstly, let’s consider the background. Ashtead is an international equipment rental company. It operates in the UK, but also has key markets in the US and Canada. The company focuses on providing good availability, reliability and ease as its three business mission values.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Although this might not sound like the most interesting business to be involved with, I can’t fault the numbers (which helped to make it the best-performing stock). In the latest half-year results, double-digit percentage growth was seen in all key areas.

Revenue climbed 18% versus the same period last year, with operating profit up 34%. This helped to deliver a profit before tax of $979m, up from the 2020 figure of $678m, a 42% increase.

The interim dividend per share was increased by 28%, however the dividend yield only sits at 0.75%. One of the downsides of it being the best-performing stock is that the higher share price decreases the dividend yield. This might deter income investors from buying the shares, but would it deter me?

A top-performing stock for 2022?

It’s one thing to note past performance, but I want to assess if the share price gains could continue next year. After all, the move higher means that the price-to-earnings ratio has been pushed up. It’s currently 38.6, well above the FTSE 100 average. Personally, anything above 20 makes me a little sceptical.

Another potential risk going forward is the source of UK revenue. In the H1 results, 32% of revenue came from the Department of Health for pandemic-related assistance. I imagine that this business will reduce as fewer testing sites need rental equipment. This will negatively impact the UK revenue base.

On the other hand, there are reasons to support Ashtead being a top-performing stock again next year. For example, the business is investing heavily in existing and new projects. In the latest update, the investment figure was $1.2bn. This should help to pay dividends in the future as the funds are put to use.

Further, the business has healthy profit margins. In the US, the EBITDA margin was a shade over 50%. This is high, and means that Ashtead is able to turn a good proportion of revenue into profit. This will help to ease any pressures if margins are squeezed for any reason next year.

Weighing everything up

Overall, Ashtead has quietly gone about becoming the best-performing FTSE 100 stock this year. But I struggle to expect the same kind of gains in 2022 due to higher valuations and potentially lower UK revenue. Although I don’t expect the share price to fall, I won’t be investing as I think I can find better options elsewhere.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Jon Smith and The Motley Fool UK have 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

Social media and digital online concept, woman using smartphone
Investing Articles

Apple stock: Buffett is long, Burry is short. What should I do?

Our author thinks about whether following Warren Buffet into Apple stock might be a good addition to his portfolio –…

Read more »

Close-up of British bank notes
Investing Articles

5 ‘no-brainer’ dividend shares to buy today

Is there an easy way to narrow down the list of FTSE 100 dividend shares? I try one approach, with…

Read more »

Close-up of British bank notes
Investing Articles

£5,000 to invest? 2 dividend-paying penny stocks I’d hold to 2030

I think these high-yielding penny stocks could help cushion the impact of high inflation on my returns. Here's why I'd…

Read more »

Renewable energies concept collage
Investing Articles

2 green stocks that I think are no-brainer buys for the future

Jon Smith explains two of his favourite green stocks at the moment, one for growth and the other for income…

Read more »

An airplane on a runway
Investing Articles

The Rolls-Royce Share price may be set for take-off!

After an upbeat Civil Aerospace Investor Day, here's why I think the Rolls-Royce share price could be set for take-off…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

2 beaten-down growth stocks to buy as inflation rises

Despite inflationary pressures and recession concerns, I am looking at some top growth stocks to solidify my portfolio over the…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Is the IAG share price too good to miss at current levels?

Jabran Khan delves deeper into the current state of play with the IAG share price and decides if now is…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

5 of the highest-paying income stocks compared! Which one is best for my portfolio?

Income stocks are certainly in vogue right now amid sky-high inflation. But which of these big dividend payers is the…

Read more »