1 smart FTSE 100 stock I’d love to buy for returns and growth for my ISA!

This Fool explains why this FTSE 100 firm is on her radar and breaks down her view of it, specifically its potential for growth and returns.

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FTSE 100 incumbent Bunzl (LSE: BNZL) looks like a great stock for me to buy for my Stocks and Shares ISA.

Here’s why I’m planning on snapping up some shares as soon as I have some investable cash!

Supporting businesses

Business support and distribution giant Bunzl has a great track record of performance, a shrewd business model, and a wide profile, all of which make it seem like an attractive investment opportunity for me.

The shares have done well in recent months despite continued macroeconomic and geopolitical volatility.

Over a 12-month period, they’re up 5%, from 3,095p at this time last year to current levels of 3,129p. This is positive, during a time when many stocks, and the FTSE 100 index itself, have come under intense pressure.

The bull case

I’m unable to ignore Bunzl’s track record of performance, growing revenue and profit, and the fact it seems to navigate economic uncertainty well, as shown by historic trading data readily available.

Moving to the present, a pre-close update for the year ended 31 December 2023 released last year underlines my point. The business said revenue is to come in very close to 2022 levels, mainly due to exchange rates and continued acquisitions. In fact, it announced three new ones in the same update! It seems to me the current turbulence isn’t halting the firm’s propensity for growth.

Next, Bunzl’s operations have a certain amount of defensive ability, in my view. This is linked to its forays into the food and healthcare market. This ability can help keep revenues and performance stable. For example, it provides essential medical equipment to the healthcare sector, as well as packaging for the food industry.

Looking at fundamentals, the shares actually look decent value for money, despite their recent slight rise. They currently trade on a price-to-earnings ratio of 21. This may seem high, but I have no qualms paying a fair price for a top company.

Finally, the shares would boost my passive income. A dividend yield of 2% may not look like the highest, but I see no reason why this can’t grow in line with the business. Plus, it has a great track record of increasing payouts. However, I’m conscious dividends are never guaranteed and past performance isn’t an indicator of the future.

Risks and my verdict

There are a couple of risks that could derail Bunzl, in my view. The first is continued economic turbulence, namely soaring costs and shipping issues. As costs rise, it may need to increase prices which could hurt demand and sales.

The other issue is around its successful acquisition-led growth approach. Acquisitions are great when they work out and boost a firm. However, just one that doesn’t work out could be harmful to the firm’s balance sheet, investor sentiment, and payouts. This is because disposals can be costly from a financial and reputational perspective.

Overall, a long and storied track record, defensive ability, passive income, as well as an enticing valuation, make Bunzl shares unmissable for me.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Bunzl Plc. 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.

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