FTSE 100 shares aren’t always the most exciting enterprises out there. After all, the large size of these mostly mature businesses doesn’t typically offer much in terms of chunky share price appreciation potential.
However, given time, even a boring company can evolve into a terrific investment.
Today, the index continues to be relatively volatile in the face of economic uncertainty. But with the situation slowly improving, investor sentiment is back on the rise. And that could spark some encouraging recovery tailwinds for oversold, top-notch firms. Some have already started.
With that in mind, let’s explore two companies from the UK’s flagship index I’ve currently got my eye on.
The best retailer in Britain?
B&M European Value Retail (LSE:BME) looks like a bog-standard value retailing business on the surface. But digging deeper reveals some staggering statistics.
For starters, as per its latest results, the group’s operating profit margin stands at 10.8%. That may not seem like much compared to other corporations. But for retail, it’s one the highest in the entire industry.
For reference, the sector average is only around 4%. And when looking at a leader like Tesco, it’s barely able to scrape past 3%.
Pairing this with double-digit sales growth in the middle of a cost-of-living crisis is a clear indicator in my mind that management is successfully capitalising on demand for cheaper shopping solutions. So it’s no wonder the stock has already surged more than 80% in the last 12 months.
Of course, B&M isn’t the only value retailer for consumers to choose from. And as economic pressure on household budgets increases, undercutting from competitors could compromise the firm’s impressive margins.
Nevertheless, even with this risk and the recent surge in valuation, the stock only trades at a P/E ratio of 16. That’s only a slight premium to Tesco’s 14 despite being, in my mind, a far better business.
Therefore, I think this firm could still be a fine addition to my portfolio at today’s price.
Simplifying supply chains
Being a manufacturing company comes with a lot of headaches, especially in regards to managing and maintaining supply chains. If a steady stream of raw materials doesn’t continue to flow, production can quickly become halted, compromising the revenue stream.
With modern products and devices needing lots of speciality components that can rarely be sourced from a single supplier, logistics can quickly turn into a nightmare.
And that’s where RS Group (LSE:RS1) steps into the picture. The company acts as a middleman, building relationships with thousands of suppliers to provide hundreds of thousands of components that manufacturers can buy directly from it.
The end result is a massive simplification of supply chains for customers. As such, attracting new business becomes exceptionally easy, driving strong revenue and earnings performance.
Lately, the stock hasn’t had the greatest run, with shares falling by 23% in the last 12 months. With the manufacturing sector as a whole slowing due to the macroeconomic environment, short-term demand is lacking.
But this is only temporary. Manufacturing is cyclical, and providing that RS Group can weather the storm, buying today could deliver impressive returns in the long run. At least, that’s my conclusion, considering the firm’s impressive track record.
