B&M Stock.... I like it!

Summary

In this video, the creator discusses their current view on B&M stock, explaining why they are actively buying shares despite its recent downturn. The stock has dropped nearly 10% in the past five days, but the creator believes it presents a strong opportunity, citing its solid past performance, revenue growth, low valuation, and attractive dividend yield. While acknowledging risks, such as a weak Q1 update and a high debt load, the creator remains optimistic about the company’s future, particularly its expansion plans and the potential for special dividends. They continue to build their position, emphasizing the stock's long-term value potential.

Takeaways

• 😀 B&M stock has recently fallen nearly 10% in the last 5 days despite positive interim results, showing a disconnect between the company's performance and stock price movement.
• 😀 Despite recent stock price declines, B&M has shown strong revenue and profit growth over the last few years, making the current price attractive for potential investors.
• 😀 B&M's revenue has grown from £3.8 billion during the COVID-19 period to £5.5 billion, and their profit has increased from £326 million, showing strong execution in a tough market.
• 😀 B&M's stock is currently trading at a low multiple of around 10 times earnings, which is much cheaper than its historical average and relative competitors like Max & Spencer.
• 😀 The company has a solid 4.3% dividend yield, and there are expectations of a special dividend, which could increase the yield to around 10%.
• 😀 CEO optimism is evident in the company's reaffirmed guidance, with plans to keep growing and expanding stores, particularly in the UK and France.
• 😀 Despite a weak Q1, B&M's sales growth accelerated in Q2, increasing by 6%, and they are heading into the peak Christmas season with renewed momentum.
• 😀 B&M plans to expand significantly with a target of 1,200 stores in the UK, double its current number, and further growth in France, which could drive future value.
• 😀 While the company does have some debt and a slightly challenging balance sheet, its solid profit margins (around 5-7%) and revenue growth remain strong indicators of stability.
• 😀 The risk-to-reward ratio is appealing for investors, with a potential 41% upside on low projections and up to 130% upside if growth accelerates as expected, including dividends.
• 😀 The market's negative reaction to B&M's stock is puzzling, as the company's recent performance and growth outlook do not justify such a significant drop in share price.

Q & A

Why is the stock price of B&M down nearly 10% in the last 5 days despite positive interim results?

The initial positive reaction to B&M's interim results, with a 5% increase in stock price, was followed by a significant decline of 13.3%. This may be due to market reactions driven by broader market conditions, including concerns about the economy, the UK budget, and possibly weaker-than-expected results earlier in the year, despite the positive long-term outlook.

What is the current market trend for B&M stock, and how does it compare to its past performance?

B&M stock has seen a significant decline, down 38% year-to-date. Historically, the stock had a peak in late 2023 but has experienced fluctuations. This decline brings the stock close to its levels during the COVID lows, indicating that it could represent a potential opportunity based on past performance trends, which include strong revenue and profit growth.

What is the outlook for B&M based on their recent interim results?

B&M's interim results show a positive shift, with revenue growth of 3.7% and strong sales growth in Q2, up 6% from Q1. The company's management reaffirmed guidance for continued growth, and the retailer is optimistic about the Christmas season, which traditionally drives significant sales.

Why is the stock trading at a low P/E ratio compared to its competitors?

B&M is trading at around 10 times earnings, which is significantly lower than its competitors, such as Max & Spencer at 15 times earnings. This low P/E ratio could suggest that the market is undervaluing B&M relative to its historical performance and growth potential, especially considering its solid track record in revenue and profit growth.

What is the dividend yield for B&M, and how could it potentially increase?

B&M currently offers a 4.3% dividend yield. There is also the possibility of a special dividend, which could increase the yield to around 6-7%, depending on the final dividend payout. This makes the stock appealing for investors seeking income from dividends.

What factors contributed to the recent decline in B&M's stock price?

The recent decline in B&M’s stock price could be attributed to a combination of factors, including market uncertainty due to the UK government’s budget and concerns from the weaker Q1 results. However, the interim results were strong, and the company remains optimistic about future growth, especially in Q3 and Q4 during the peak Christmas season.

What are B&M's expansion plans, and how might they impact future growth?

B&M plans to expand its footprint, targeting 1,200 stores in the UK, doubling the number of locations it currently operates. In addition, B&M is opening more locations in France, which could become a significant growth driver in the next several years. These expansions, alongside continued strong execution, position B&M for future growth.

How does B&M compare to other UK retailers in terms of profitability?

B&M has strong profit margins compared to many other UK retailers. While companies like Tesco operate with profit margins as low as 1%, B&M’s profit margins are in the range of 5-7%, which is considered relatively healthy in the retail sector, reflecting efficient operations and cost control.

What are the risks associated with investing in B&M at the moment?

The main risks include B&M’s relatively high debt load, which could be a concern in a rising interest rate environment, as well as potential pressure from broader economic conditions and competition. Additionally, B&M has experienced volatility, with its stock price being down significantly this year despite the company’s overall good performance.

How does the author view the current investment opportunity in B&M stock?

The author views B&M as an attractive investment opportunity, citing its low P/E ratio, solid dividend yield, and promising growth prospects through store expansion. Despite recent stock price declines, the author is actively buying shares and plans to increase their position, believing the risk-to-reward ratio is favorable based on the company’s fundamentals.