As the Halma share price continues to rise, I think investors should take note of this winning growth stock

As Halma’s latest trading update sends the stock higher, is the share price an opportunity to buy one of the FTSE 100’s best-performers?

| 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.

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on

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.

A 320% gain makes the Halma (LSE:HLMA) share price one of the FTSE 100’s better performers over the last decade. £1,000 invested in the stock in 2014 would have a market value of £420 today.

Created with Highcharts 11.4.3Halma Plc PriceZoom1M3M6MYTD1Y5Y10YALL26 Sep 201926 Sep 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

The company’s success has been its ability to grow by acquiring other businesses. And the latest trading update on Thursday (26 September) indicates that things are still going well in this regard.

Trading update

Overall, the market viewed Halma’s latest report positively, sending the stock up on the news. And there were clear reasons for optimism. 

Should you invest £1,000 in M&G 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 M&G made the list?

See the 6 stocks

The company reported growing revenues and widening profit margins. Importantly, management also stated that the last six months have gone well in terms of acquisitions.

Halma spent around £85m during the first six months of its financial year. In doing so, it added four businesses to its network of safety products. 

According to management, the outlook is also positive on this front. So investors can expect the firm to keep making deals and expanding its portfolio over the rest of the year.

Growth by acquisition

Attempting to grow by making acquisitions is intrinsically risky. If management anticipates returns that don’t materialise, a company can be left with nothing but debt to pay off.

There are a couple of reasons for thinking that Halma has this risk pretty well under control though. One is the firm has a long history of successfully acquiring businesses.

Another is the size of business the company focuses on. These are typically small compared to the overall business, meaning the consequences of a mistake are limited.

The largest acquisition outlined in the latest report cost Halma £44m. Even if that turns out badly, the effect is likely to be small in the context of a firm generating £2bn in revenues.

Valuation

With any investment – whether it’s stocks or solar panels – an obvious question to ask is how long it will take to pay for itself. And Halma seems expensive from this perspective. 

A price-to-earnings P/E ratio of 37 suggests a long wait before the company makes enough in profits to repay an investment at today’s prices. But things aren’t quite so straightforward.

Obviously, Halma’s anticipated earnings growth should help reduce this time considerably. But there’s another point worth noting.

The shares traded at a P/E ratio of 37 back in 2019. And investors who bought the stock back then and held it since would have outperformed the FTSE 100 as a whole.

Should I buy the shares?

I think investors who buy Halma shares have a decent chance of doing well over the long term. It’s a quality business and I expect it to keep growing for some time. 

Despite this, I’m not looking to buy the stock right now, simply because I think there are even better opportunities at the moment. And those are where I’m focusing my attention.

Halma is a business I’ve been following for some time and that’s not going to change. When I think the time is right, I’ll be ready to add it to my portfolio.

We think earning passive income has never been easier

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

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.

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma 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 »