I’d invest in this resilient share right now

It seems neither the growth story nor current trading have stalled with this company. And I’d be a buyer of the shares here.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m always hunting for defensive, cash-generating and resilient stocks if they’ve growth potential. That’s why I’m keen on the FTSE 100’s AstraZeneca. But the Lock’n Store (LSE: LOK) share price looks perky today on the release of the half-year results report, and I like that company too.

As with many successful and growing publicly-listed companies, this one has a good record of advancement in the financial figures. And that includes an impressive escalation of the shareholder dividend.

A sought-after share

But the stock’s charms haven’t gone unnoticed. The valuation is high, with the forward-looking earnings multiple running near 40 for the trading year to July 2021. However, even after a mighty bounce-back from its recent coronavirus lows, at 570p, the share still needs to advance by around 27% to hit its February high near 725p. I think there’s every chance it will.

A rich valuation tends to automatically put some investors off a stock, and many will move on to the next opportunity. I did that myself for years but discovered such an approach kept me out of most of the best outperformers on the stock market.

Perhaps the key to successfully investing in higher-rated companies is to focus on growth. You should look for a record of solid improvement in the financial numbers. And that’s what I see in Lock’n Store. Of course, the big risk of flirting with higher valuations is any set-back operationally could cause a valuation down-rating. This leads to a plunging share price.

As well as risks, there are opportunities. For example, if you’d have put money into Lok’n Store 10 years ago and left it there until today, you’d be sitting on a capital gain of almost 600%. But some of that gain could have occurred because of a re-rating of the valuation upwards as the growth story became recognised by the market. On top of those gains, you’d have enjoyed a rising income return from the shareholder dividend.

Decent trading and growth on track

Today, the company reported decent progress in most of the ‘right’ figures. And the directors even pushed up the interim dividend by 9%. That decision tells us much. Indeed, all the stores remain open while maintaining social distancing measures.” On top of that, Lok’n Store has been paying all its staff as normal through the crisis with “minimal use of [the] government furlough scheme.”

Trading so far in the firm’s current trading year to July has been resilient.” And I think the company’s performance through this pandemic underscores the strength of the business model. Now, I’m beginning to understand why the stock is prized by investors.

Meanwhile, the expansion pipeline looks healthy with 16 sites that chief executive Andrew Jacobs reckons will significantly increase operating space over the coming years.”  It seems that neither the growth story nor current trading has stalled. I’d be a buyer of the shares here.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »

Investing Articles

2 FTSE dividend shares yielding more than 6% with P/Es of less than 9!

Harvey Jones picks out two brilliant FTSE 100 dividend shares that yield more than 6% but are selling at strangely…

Read more »