In the UK stock market, some businesses just seem to keep on performing well, year after year.
Take Cranswick (LSE: CWK), for example. I first noticed the company in about 2010. Since then, the performance of the shares has been amazing. They’re up just over 20% in this year alone.
The firm makes premium, fresh and added-value food products for big supermarkets, grocers and the food-to-go sector. On top of that, there’s a “substantial” export operation and a pet food business.
Most of the products are based on pork and poultry, and Cranswick owns much of its own supply chain, from pig farms to producing the final product.
Multi-year progress
There have been steady gains over the past 14 years since I’ve been watching. But the good news keeps on coming, and today (29 July) Cranswick delivered yet another positive trading statement. This time it covers the first quarter to 29 June 2024.
Trading has been strong with “robust” demand in the firm’s core UK food categories. Revenue rose 6.7% year on year and 6.4% on a like-for-like basis, driven by “strong” volume growth.
Export sales were well ahead but offset by lower pricing in Asia and the EU. However, the directors reckon there are early signs that Far East prices are beginning to firm up.
One of the things I like about Cranswick is the way makes bolt-on acquisitions to help keep the growth momentum going. It’s doing it by reinvesting cash flow and profits mostly, because the balance sheet looks robust with modest net debt.
For example, the firm acquired Grove Pet Foods in 2022 and has since partnered with Pets at Home to supply dry dog foods under its Wainwrights and Step Up brands. In today’s update, the company said revenue came in “strongly” ahead in that division.
This year, the company acquired an East Anglian pig supplier, adding to the company’s pig herd. Looking ahead, chief executive Adam Couch said the firm expects to further invest in its agricultural operations to ensure “supply chain security and value optimisation”.
A positive outlook
Meanwhile, the directors believe demand for Cranswick’s products will likely remain robust for the rest of the year.
City analysts have pencilled in an increase in normalised earnings of just under 11% for the current trading year to March 2025 and about 5% for the year following.
With the share price near 4,685p, the forward-looking earnings multiple is a just below a full-looking 18 for next year. So this growth story is well known to the stock market.
Today’s valuation is higher than the modest rating I first stumbled across in 2010. Therefore, there’s a bit of risk in that situation for shareholders.
If Cranswick fails to meet its estimates, the share price may decline. It’s happened before, and the multi-year earnings record does have its weak patches. So it’s not always been straight up for this one.
Nevertheless, on balance and despite the risks, I reckon Cranswick is worth consideration as a stock to hold for the long term.
