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Shares to buy: why I’d go for this growing, cash-rich company right now

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Recruitment specialist CPL Resources (LSE: CPS) released a bullish full-year results report this morning. And the stock is responding well, up almost 5% as I write. Let me explain why, to me, it’s one of the shares to buy right now.

The company describes itself as Ireland’s “leading” talent and workforce solutions provider. But operations span 11 countries and the firm has around more than 10,000 employees and some 41 offices worldwide.

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A cracking growth investment

So far, CPL Resources has been a cracking growth investment. If you’d invested in the shares 10 years ago, you’d be sitting on a capital gain of around 250% now. On top of that, there’s a long history of shareholder dividend payments. And an impressive record of generally rising revenue, earnings and cash flow has fuelled the progress.

One of the great things about CPL Resources today is the valuation looks modest. In many cases, proven growth leads to an escalating valuation. But with CPL, I reckon the cyclicality of the sector scares investors away from over-exuberance.

Right now, for example, with the shares near 695p, the forward-looking earnings multiple for the trading year to June 2021 is just under nine. But if you adjust for the net cash pile on the balance sheet, the multiple drops to just below seven. Meanwhile, the anticipated dividend yield is just below 3%. Indeed, it’s hard to describe the stock as being expensive.

Decent trading figures

I know we shouldn’t weight on this too much, but there’s a lovely multi-year consolidation on the share-price chart. It looks like the stock is poised to break out to new higher ground and, to me, that’s a bullish sign.

Meanwhile, a move higher is backed by some strong fundamentals. Today’s report covers the full trading year to 30 June and reveals to us some decent trading figures. Compared to the previous year, a 4% increase in gross profit drove a 10% lift in adjusted earnings per share. And strong cash generation lifted that net cash position from just over €40m the previous year to a healthy-looking €68m in this reporting period.

Looking at the trading and financial record, there isn’t even a blip to show the effects of the Covid-19 crisis. And I reckon the stress test supplied by the crisis helps us to sort out decent businesses from weaker ones. To me, one of the most effective investing strategies can be to go with strength every time. So  CPL Resources enthuses me now.

Strong business model

Chairman John Hennessy said in today’s report the performance delivered by CPL Resources is “particularly impressive” given the impact of Covid-19 on the business since March. He reckons the ongoing pandemic has affected the firm’s permanent fees, but nevertheless the company produced profitable growth through the period. He thinks the good results demonstrate the “resilience” of the business model.

Looking at the numbers and the company’s long record of success it’s hard to disagree with that assessment. CPL Resources has been impressing me for some time. And I’d be keen to buy some of the shares and hold for at least the next 10 years.

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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.

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