The rise of FTSE 100 incumbent B&M (LSE: BME) has been nothing short of amazing, in my opinion. However, I reckon the shares still have some way to go.
Here’s why I’d snap up the shares in a heartbeat if I could only pick one stock to buy right now!
Remarkable rise
B&M has grown from humble beginnings in 1978 to FTSE 100 power house in 2023. The firm’s growth trajectory through acquisitions and organic growth should be a blueprint for other businesses, if you ask me.
So what’s happening with B&M shares currently? As I write, they’re trading for 581p. At this time last year, they were trading for 391p, which is a 32% increase over a 12-month period.
I’m impressed, especially as many other FTSE stocks have struggled amid macroeconomic turbulence.
The bull and bear case
The rise of discount retailers has made it easier for firms like B&M to capture market share and grow. After all, everyone loves a bargain (I know I do). Plus, the recent cost-of-living crisis has shone a spotlight on food inflation and need to seek cheaper alternatives. B&M has seen its performance in recent times soar, which has boosted the shares and its investment viability.
Another aspect I’m impressed with is B&M’s growth strategies. Aside from clever acquisitions — and the slew of new locations it continues to open to expand its footprint — it has invested in itself. I’m referring to a move to a new head office and the continued plans to open new and improved state-of-the-art distribution centres to give itself the best chance to succeed, and how has it succeeded!
Moving on to some fundamentals, B&M shares still look decent value for money to me right now on a price-to-earnings ratio of 17. This is even after its impressive share price ascent. Plus, a dividend yield of over 6% is higher than the FTSE 100 average of 3.9%. However, I understand that dividends are never guaranteed.
Looking at potential risks, I’m always wary of acquisitions, no matter a firm’s record of successful ones. When acquisitions work out they’re great. But when they don’t, repairing a costly mistake can have untold damage on a balance sheet as well as investor sentiment.
Finally, B&M’s shares and performance has been soaring for some time but what about when the economy is in a better place? Could we find that discount retailers fall out of fashion as more people can afford premium goods once more? There is a slight risk of this but I’m not concerned. This is because there will always be those looking for bargains, as well as lower income households looking to take advantage of discount retailers and make their budgets stretch as far as possible.
Final thoughts
There are certain FTSE stocks I wished I had snapped up much earlier, even years ago. B&M definitely sits on that list.
However, I reckon there’s still a chance to buy some shares now. If the business continues to grow at the same rate it has, there’s no telling how well it could do and how big it could eventually end up!
