Only a handful of blue-chip companies have, so far, reported a better-than-expected trading performance over the past few months. FTSE 100 stock Bunzl (LSE: BNZL) has become the latest to do just that, having delivered an increase in sales for the first six months of 2020.
As such, now could be a great time to snap a share of this defensive business while it continues to trade at a discount valuation.
FTSE 100 stock reports growth
Many companies have reported a slowdown in sales over the past few months. However, it seems Bunzl has been able to escape the same fate.
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In its latest trading update, the company said its results for the half-year to June would show a “strong” trading performance. Management expects to report sales growth of 6% year-on-year for the first half.
The FTSE 100 stock has been able to prosper as other businesses have struggled, because of the essential services it provides.
High demand for its grocery and hygiene products helped offset a slowdown in demand for other products. “Significant sales volumes of Covid-19 related products” also helped support the top line, according to the firm.
Management is now so confident in the company’s outlook, it has decided to repay all the coronavirus-related government financial support it has received.
Growth champion
The FTSE 100 stock has a long history of outperforming expectations. So the company’s performance over the past few months isn’t entirely unexpected.
The performance also suggests Bunzl is well-positioned to weather a second wave of coronavirus, if one emerges. Therefore, the business could continue to generate strong returns throughout the remainder of 2020.
And if there’s no second wave, I think Bunzl looks so attractive as an investment for the long term. The company has an extensive track record of growth through acquisitions.
Over the past two decades, it has acquired 157 businesses around the world with an average purchase price of £20m. This deal strategy has helped improve revenues and profit margins as the company has been able to extract better economies of scale across the ever-growing group.
Management has previously noted the company has identified a further 1,000 possible acquisition targets. So, it doesn’t look as if Bunzl’s growth is going to slow any time soon.
Dividend history
Bunzl’s growth strategy has helped establish the company’s reputation as one of the best FTSE 100 dividend investments. Its dividend has risen every year for several decades, and the stock was forecast to yield 2% for 2020.
Still, despite all of the above strengths, shares in Bunzl are currently trading below the level they started 2020. That suggests the FTSE 100 stock offers a margin of safety at current levels.
Looking ahead, Bunzl may benefit from further high demand for Covid-19 related products. The group could also profit from buying struggling peers at low prices. That could help drive the company’s shares higher over the long run.
Therefore, now could be a great time to buy shares in this FTSE 100 stock while it offers a margin of safety.
