This FTSE stock has announced a major acquisition! Here’s what I’m doing now

Jabran Khan details a FTSE stock that could be primed to grow massively due to an exciting new acquisition that will enhance its offering.

| 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.

Whenever a FTSE stock announces an acquisition, I am interested to learn more. What’s the reason behind the acquisition and how will it help the company in question? Halfords (LSE:HFD) announced a major acquisition last week that I believe will boost its profile, growth, and performance in the short and long term. Should I add add the shares to my portfolio at current levels? Let’s take a look.

FTSE retail giant

Halfords is the UK’s leading retailer of cycling products as well as automotive products and services. It employs over 10,000 people and has more than 750 locations throughout the country. Halfords claims that 90% of the UK is never more than 20 minutes away from a Halfords shop or one of its auto centres.

As I write, Halfords shares are trading for 352p. A year ago, the shares were trading for 260p which is a 35% return over a 12-month period. In recent weeks, positive interim results and the acquisition deal  have boosted the shares. In December to date, Halfords shares are up 10%.

Acquisition and positive performance

On 1 December, Halfords announced it signed a sale and purchase agreement to purchase Axle Group Holdings Ltd for £62m. Axle owns the National Tyres and Autocare, Viking Wholesale Tyres, and Tyre Shopper brands.

This acquisition is a great move in my opinion. Halfords already has its own auto centres where it offers MOTs and services for motorists. Upon completion, Halfords will have approximately 604 garages, 234 consumer vans, and 190 commercial vans. This number will mean it has comfortably surpassed its target of 550 garages. Halfords places a great emphasis on motoring revenue and the National Tyres and Auto Care centres will help grow its motoring revenue stream. 

In November, Halfords also reported positive interim results for FY 2022. It confirmed that revenue, profit, sales growth, and cash generation had increased compared to 2021 levels. Many FTSE stocks in the retail sector have suffered due to supply chain issues. Halfords pointed towards the same problems but was able to leverage its competitive advantage and huge profile to record excellent results.

Risks of investing

Buying Halfords shares does come with risks, however. As mentioned, the current supply chain crisis has meant many businesses are unable to fulfil the demand for some of their products. Halfords has faced this issue in its burgeoning cycling department. If these issues persist, performance could be affected. Rising inflation and costs are a worry too. If these costs are passed on to customers, Halfords could lose customers and market share. This could affect performance and investor returns as well.

Overall, I believe this recent acquisition and the recent positive results will boost Halfords growth trajectory upwards. In addition, Halfords has a good track record of performance which fills me with confidence too. I understand past performance is not a guarantee of the future but I use it as a gauge when reviewing assessment viability. Halfords currently sports a price-to-earnings ratio of just 12, which I consider cheap. At current levels I would happily add Halfords shares to my portfolio.

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.

Jabran Khan 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

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »