The Motley Fool

Here’s another super stock I’d buy today

I haven’t lost any of the enthusiasm I had in October 2018 when last writing about Harry Potter publisher Bloomsbury (LSE: BMY). Back then the company looked to me like a decent value proposition with big growth ideas, so I’m pleased to see today’s positive “ahead-of-expectations” full-year results from the firm.

Decent progress

At 235p, the share price is up around 14% since October and the company still displays some tempting value indicators such as a forward-looking dividend yield just over 3.5% for the trading year to February 2020 and an anticipated forward earnings multiple around 14. I don’t think that’s too high a valuation considering that City analysts following the firm have pencilled in double-digit percentage increases in earnings for the next couple of years.

Sign up for FREE issues of The Motley Fool Collective. Do you want straightforward views on what’s happening with the stock market, direct to your inbox? Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio. Click here to get started now — it’s FREE!

Today’s figures reveal that although revenue only rose a little under 1% during the year, diluted earnings per share jumped up 16% and the directors slapped almost 6% on the total dividend for the year. The firm has been a consistent dividend raiser, claiming that this is the “24thconsecutive year of dividend growth.” Over the past five years, the dividend has grown by 36%, which strikes me as decent progress.

The company’s global growth strategy was reinvigorated just over a year ago when the company shaped its plans around the theme of a Bigger Bloomsbury under the current chief executive Nigel Newton. He reckons the company achieved all seven of the initiatives launched under the banner, including improved working capital engineered by lowering inventories by £2m.

Fast-growing non-consumer trade

He explained in today’s report that the Academic and Professional division delivered an “outstanding” performance in the period with revenue climbing 13% leading to a £3.5m uplift in profit before tax, which is good news because the year before, that division lost £0.4m. Profit of £3.1m now represents quite a turnaround in the division. Overall, what the company classifies as Non-Consumer revenues grew by 7%, helped by progress in Digital Resources and the May 2018 acquisition of IB Tauris in that area of operations.

The Non-Consumer business delivered around 15% of overall operating profit in the period and growing. It looks like a fast-growing area of business worth keeping an eye on and which could help propel the share price and profits to new heights in the years to come.

Bloomsbury’s share price peaked on the back of stonking sales from the Harry Potter series back in 2005 before falling back considerably. But there is much more to the publisher than just the boy wizard, even though the franchise remains important to the firm.

If you’d bought shares in the company 10 years ago, and after the fall-back from their peak, you’d be sitting on both dividend and capital gains. The same if you’d bought into the firm five years ago, and it’s all because of steady operational progress as exemplified in the record of dividend growth. I like the story here and would be happy to hold the stock with a five-year-plus time horizon in mind.

Proven Pedigree

Our free guide “A Top Small-Cap Share” features investing analysis that we wouldn’t want you to miss out on! Backed by the Motley Fool Hidden Winners analyst team, we believe that this proven business has plenty of growth potential left under its bonnet – to find out its name and why we rate it so highly, click here to receive your complimentary report.

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.