When I invest in growth stocks, I often buy them even if they aren’t selling cheaply. That’s certainly the case with Bunzl (LSE:BNZL), which, to my mind, isn’t exactly ‘on sale’. However, I still think it’s one of the best UK investments and could be right for my portfolio.
The company distributes a wide range of non-food consumable products as a primarily business-to-business enterprise. These include cleaning and hygiene supplies, personal protective equipment, packaging, and food service disposables.
Although it’s a UK company (with its HQ in London), about 60% of its operating revenue comes from North America. And only around 12% comes from its domestic market and Ireland.
Why I like it
Perhaps most significant when considering a growth investment is the revenue growth rate. Bunzl has a 10-year average annual rate of 8%, which I find impressive. That also hasn’t been slowing down. In the last year, it’s been 11%.
The company has an active acquisition strategy. In 2021 and 2022 combined, Bunzl announced 26 acquisitions, agreeing to spend £800m.
Over the past decade, it has also increased the percentage of orders made digitally to 69%.
These two factors alone make it clear to me why the revenue growth for the organisation is so strong.
However, global and expanding operations often come with geographic risks. Bunzl is present in 31 countries. International issues could include supply-chain problems, such as those that were seen during the pandemic.
The valuation doesn’t concern me
One of the trickiest aspects of investing in Bunzl is its valuation. This is a clear risk because any bad news could send the share price tumbling.
For example, the price-to-earnings ratio of the shares is around 20. That means I’ll pay about 20 times the company’s profit per share if I invest.
If I were looking for a value investment, Bunzl wouldn’t make the cut. However, my aim here is to find top UK growth shares. For that reason, as long as the shares aren’t trading nearer 25 times earnings or above, I think I can see a winner.
The share price also doesn’t move up and down erratically. The last significant drop was around the pandemic. Before and after that, the price has seen relatively stable long-term growth.
A top pick for me?
The company is at the top of my research list for when I’m tracking down growth shares. I know some of the significant weaknesses, but I’m confident there’s an excellent business here.
Some of the critical elements that could make this one a buy for me are:
- Stable long-term revenue and share price growth
- Substantial acquisitions and a digital mindset
- An average 2.8% dividend yield that’s always been paid out since 1993
However, I’m still considering investing in the shares. I want to analyse it further before adding it to my portfolio. That’s because I already own a handful of growth shares from the UK and the US, and I always take my time before adding another.
