My favourite AIM growth stock is up 10% after today’s results and 991% over 5 years!

Harvey Jones had been looking forward to today’s results from this AIM-listed growth stock for weeks and they haven’t disappointed. Now he’s keen to buy more.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young black colleagues high-fiving each other at work

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in AIM-listed growth stock Warpaint London (LSE: W7L) jumped 10% after this morning’s dazzling first-half results. I’m thrilled because I bought Warpaint shares in January, and wish I’d bought them years earlier. That’s hindsight for you.

The specialist supplier of colour cosmetics announced record first-half sales for the six month to 30 June, with earnings before interest, tax, depreciation, and amortisation soaring 66% to £12m year on year. Group pre-tax profit jumped almost 76% to £10.9m.

I’m pleased and relieved but also a little irritated. The shares were sliding in the run up to today’s results, and for no good reason that I could see. So despite today’s stellar results, the Warpaint share price is still down 12.1% over one month.

Should you invest £1,000 in Gsk right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Gsk made the list?

See the 6 stocks

Can Warpaint keep whipping the competition?

Longer-term investors won’t be complaining, though. Its shares are up 74.92% over one year and a bumper 911.76% over five.

Created with Highcharts 11.4.3Warpaint London Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

I bought Warpaint after noting that it had repeatedly hiked earnings guidance. It also boasted ample cash reserves, zero debt, and an impressive track record of paying dividends, too.

Its main brands, W7 and Technic, are sold both in the UK (including by Tesco), and via local distributors and retail chains in the US and Europe. Warpaint has an e-commerce business in China too. These are early days, but for a £437m company, the growth potential is huge.

Today, we learned that UK revenues had jumped 17% to £15.5m. International sales did notably better, jumping 30% to £30.3m. In total, they grew 25% to £45.8m.

Better still, gross profit margins widened by 334 basis points to 42.5%. The board put this down to successful new product lines, sourcing and volume savings, growing e-commerce revenue, and increased US profitability.

CEO Sam Bazini says there continues to be “significant growth opportunities” for Warpaint, especially since group sales are typically weighted to the second half, “reflecting Christmas seasonal sales and ongoing sales momentum”.

This AIM stock is true

Warpaint continued to grow throughout the cost-of-living crisis, so I’m hoping it will do even better when the economy picks up (assuming it does). Falling interest rates will help on this front, although the recovery is not a done deal yet.

Cosmetics is a highly competitive industry and fashions change rapidly, so Warpaint has to keep peddling hard to maintain the momentum. It’s been helped by the fact that its brands are at the affordable end of the market. That advantage could reverse if shoppers feel better off and start trading upwards, but I don’t think we’re there yet.

It would be brilliant if Warpaint could crack America, but that’s never easy for a UK-based company. As for China, who knows? There’s massive potential here, if the board can get its strategy and brands right.

Today’s yield of 1.69% is better than it looks, given the ballistic share price. Unsurprisingly, the shares aren’t cheap, trading at 28.09 times earnings. As I’ve seen, they can be volatile, and even a minor earnings slip could trigger a major sell-off.

I was optimistic ahead of these results and tempted to take advantage of the recent share price dip to up my stake. Now, I wish I had. I’ll look to buy more before the next set of results.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Harvey Jones has positions in Warpaint London Plc. The Motley Fool UK has recommended Warpaint London 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »