The Motley Fool

£1k to invest? A FTSE 100 stock with growth potential I’d buy for my Stocks and Shares ISA

FTSE 100 company Smurfit Kappa Group (LSE:SKG) is a key player in the paper and packaging market, which is seeing a boom thanks to increased e-commerce demand during the lockdown. I think it is a stock with growth potential and could be a sensible place to invest £1,000 via your Stocks and Shares ISA.

The environment and safeguarding of the planet remain at the forefront of many business plans. This means companies are seeking more sustainable solutions for packing their products. Specialist packaging is necessary not only for online sales but also for the pharmaceuticals sector, food and beverages and industry in general.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Distribution of vaccines, antibody tests and vitamin shots around the globe, is increasing demand for specialist packaging solutions. Likewise, food and drink, chemicals, batteries and dangerous substances also need to be packaged with care.

This all makes packaging a vital piece in the globalisation puzzle, but it also has a great responsibility to be a leader in sustainability.

Financial outlook

Smurfit Kappa was founded in Ireland in 1934. It has a £6bn market cap, a price-to-earnings ratio (P/E) of 14, and earnings per share are £1.79. Full-year results for 2019 showed earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 7% to €1.65bn and revenue was up over 1% to €9.05bn. Growth in volume also boosted the FTSE 100 group’s performance.

It opted to withhold its scheduled dividend payment as the coronavirus pandemic spread in April. This was a disappointing move for shareholders who had previously enjoyed a dividend rise of 12% after an uptick in core earnings and revenue for 2019.

The Smurfit Kappa share price is up 29% since the March stock market crash, but I think it still has further to climb. Its directors have been buying a significant number of shares in the company, showing confidence in their ability to steer it to further success. It has plenty of liquidity to keep it afloat in times of trouble, with access to over €1.5bn. Its debt maturities have a five-year time frame and bonds mature in four years.

A stock with growth potential

Some packaging solutions Smurfit Kappa is creating include Bag-In-Tube Packagings. These are the sort of things you see on supermarket shelves, such as squeeze tubes, twist tubes and collapsible or cartridge tubes. It uses them for high-end liquids and semi-liquids such as wine, fruit juices, spirits, maple syrup or olive oil. These are used by sectors such as Cosmetics & Oral Care, Food & Beverages, Pharmaceuticals and Cleaning Products.

The sustainable packaging market is tipped to witness enormous growth in the coming years. A rise in non-biodegradable plastic waste is making the drive to adopt sustainable packaging methods more urgent. And globally, governments and local authorities backing and pushing for the production of biodegradable packaging is boosting this. 

Despite it being a market expected to experience substantial growth, competition is high and constant product innovation is necessary. However, Smurfit Kappa has an edge as it is already a market leader in this area. 

I feel optimistic about Smurfit Kappa’s growth prospects and ability to innovate. That’s why I think it is a stock with growth potential. I feel this FTSE 100 innovator would make a great addition to a Stocks and Shares ISA.

If it's growth you're looking for, the Motley Fool can boost your Stocks and Shares ISA and help propel your wealth...

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Kirsteen has no position in any of the shares 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.