The FTSE 100 index saw a healthy rise in 2021. This was naturally reflected in an increase in share prices in its constituent companies as well. Even then, there are few stocks, I reckon, that could boast of doubling investors’ money in three years. Which is why, when I looked at the share price trajectory of this stock, I took note.
Strong returns for B&M
The stock in question is B&M European Value Retail (LSE: BME), which has done exceptionally well over the past three years. However, I still find myself asking whether it can repeat its performance in the future. I mean, consider its performance over the past five years, instead of the past three years. I would have had no bigger advantage investing in the stock five years ago on this date than I did in the past three years. The stock’s price rose and then fell back in the two years between 2017 and 2019. In fact, if I go back to the time it was publicly listed in 2014, I still do not have a much bigger reason to buy the stock.
Strong trading update for the FTSE 100 stock
But there are positives to the bargain retail stores company too, which encourage me to look more closely at its numbers. In its latest trading statement, released earlier today, it has raised its earnings expectations for the current financial year after it said it “delivered a very Golden Quarter” and also its “best-ever Christmas”. This clearly indicates that the company has a fair bit going for it, and 2022 could be a good year, especially as economic recovery takes hold.
In fact, going by the fact that B&M’s earning ratio is at a relatively moderate 14.7 times, I think there is a case for its share price to rise further. It is lower than that for the FTSE 100 index as a whole, which is 18 times. And going by the fact that it expects its earnings to be higher than earlier anticipated, its price-to-earnings ratio could fall even further if the price stays at current levels.
The question of dividend yield
I also like that it pays a dividend. Its yield is nothing great at 2.8%, which is lower than even the average FTSE 100 dividend yield of 3.3%. But interestingly, this does not take into account special dividends paid out over the past year. If I consider those, its yield rises to a huge 9.9%!. Now, it might not be able to repeat that performance, but it does make me optimistic. Also, the stock has consistently yielded dividends pretty much since the time that it was listed on the stock exchange. This gives me confidence about its continuity as well, something I look forward to as a long-term investor.
Also, I think the FTSE 100 could remain strong, which in turn will keep stocks like B&M buoyed. I’d buy the stock now.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. 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.
