When I choose my best stocks to buy now, I feel somewhat vindicated when they report positive results. This is the case with drinks maker AG Barr (LSE:BAG). Two days ago it released a positive H1 trading report. Should I add its shares to my portfolio now?
Who doesn’t love Irn Bru?
The origins of AG Barr date back to 1875. Even though there are lots of soft drinks options available to consumers today, AG has maintained its popularity through its flagship product Irn Bru. I must admit it is my favourite soft drink but that’s not why I rate AG as one of my best stocks to buy now.
Irn Bru is a top selling fizzy drink in Scotland and throughout the UK. In addition to Irn Bru, AG Barr also has other drinks in the market and has exposure to the alcohol market with its Funkin brand of pre-mixed cocktails.
AG Barr has been in business for more than 100 years. The stability and growth it has shown is part of what makes me pick it as one of my best stocks to buy now. I believe it can continue to grow for the foreseeable future too.
As I write, shares are trading for 568p per share. This time last year, shares were trading for 434p. This means in 12 months it has experienced a 30% share price increase. With a price-to-earnings ratio of just over 30, some may view it as a tad expensive. I do not share that view due to its track record.
H1 trading update
The pandemic slowed sales and affected financials. Reopening has boosted AG, and its share price has benefited. FY results for the year ended 24 January 2021 showed declines in profit, revenue, and sales. Profits fell to £26m from £37.4m a year earlier. Sales dropped by 11.2% and revenue fell to £227m from £255.7m reported for the full year prior. I expected the pandemic to affect the bottom line which is why I kept AG on my best stocks to buy now list and kept faith.
When AG released its H1 trading update two days ago, results saw a bounce back from the drop off reported in FY results. AG reported first-half revenue of £134m, which is a 18% hike on the previous year. It said all its business units showed strong trading. Furthermore, it is anticipating full-year results to be significantly ahead of last year’s results and ahead of investor expectations.
Even the best stocks to buy now have risks
AG could be affected if further restrictions come into place due to new variants of the virus.
Next, there has been significant issues with haulage and logistics in the UK reported recently. A huge drop in driver numbers has led to some firms reporting deliveries may be missed affecting the supply chain. AG relies on haulage and logistics for its operation and this could negatively affect its performance too.
Overall I think AG Barr would make a good addition to my portfolio and is still one of my best stocks to buy now. It has shown long-term stability and growth and has capitalised on reopening recently. Despite the tough period over the pandemic, it will also resume its dividend this fiscal year so could also make me a passive income.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended AG Barr. 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.