FTSE 100 conglomerate Bunzl (LSE:BNZL) has been growing its revenue at just over 7% per year for the last decade. Over that time, the company’s share price has gone from £10.15 to £28.56.
A bump in the road has caused the company’s share price to falter slightly over the last couple of weeks. But if I had cash to invest right now, I’d look to take advantage by buying the stock for my Stocks and Shares ISA.
Investing to build wealth
Over the long term, the equation for building wealth through the stock market is simple. Investors need to buy shares in companies that are going to be worth more than their price today.
There are two ways this can happen. One is the share price being too low and the other is the underlying businesses generating more cash in the future than they do right now.
In my view, the second is the key to building wealth. A mispriced stock might correct itself, but if the underlying business isn’t growing, there’s no further upside for investors once this happens.
When a company can keep increasing its earnings per share, however, the value of the stock goes up. The ability to do this over the long term means the stock can continue to generate wealth for investors for the long term.
This is the method that Warren Buffett has used effectively to boost the value of Berkshire Hathway’s shares over time. And it’s the approach I’m taking with my Stocks and Shares ISA.
Bunzl shares
Over the last decade, Bunzl’s share price has increased as the value of the underlying business has grown. I expect this to continue going forward.
The company’s share price has slipped a little over the last month as a trading update reported a decline in revenues during the third quarter of 2023. I see this as a buying opportunity, though.
Bunzl’s drop in sales was attributable to pandemic tailwinds wearing off. I think that’s a short-term issue and the long-term picture for the business points to further growth.
As a conglomerate, a significant amount of the company’s growth comes from acquisitions. And the pipeline for these looks strong, with two more acquisitions in Q3 taking the total to 14 for the year.
More importantly than this, profit margins look strong. In fact, management reported that operating margins going forward are likely to stabilise above their pre-pandemic levels.
A stock to buy
To me, this points towards a buying opportunity. The short-term pessimism causing the stock to fall looks to me like an opportunity to buy shares in a business that I expect to do well over the next decade.
At a price-to-earnings (P/E) ratio of 20, the stock doesn’t look cheap and this brings an element of risk. But the company has a strong record of growth and I think it’s likely to pay off over the next decade.
Right now, the Bunzl share price is £28.61. With a spare £1,500 to invest, I’d be looking at buying 52 shares to build my wealth over the long term.
