Over the last half decade, the FTSE 100 index hasn’t gone anywhere. Five years ago, the index closed at 7,414. Today, it’s at 7,318.
Look within the index however, and you’ll find that there are lots of stocks that have delivered impressive returns over that time horizon. There are plenty that have risen more than 50% while there are a few that have more than doubled in price.
Here, I’m going to highlight one of these good performers. This stock – which flies under the radar – has smashed the broader index by a wide margin.
A FTSE 100 champion
Five years ago, shares in industrial equipment rental company Ashtead (LSE: AHT) were trading at around 1,899p. Today however, they’re changing hands for 5,093p – 168% higher.
This means that anyone who invested £5,000 in the FTSE 100 stock five years ago would now have an investment worth £13,410 (ignoring trading commissions and taxes).
It gets better though. Over the last five years, Ashtead has paid regular dividends to its shareholders. I calculate that anyone who bought the stock five years ago would have received a total of 222.4p per share in dividends by now (around £585 worth of dividends on a £5,000 investment).
So, overall, the FTSE 100 stock would have turned £5,000 into around £14,000.
That works out at an annualised return of about 23% per year, which is a great result. That’s a higher return than the likes of Amazon, Alphabet, and Netflix have delivered.
Why I’m looking at this stock now
Is it too late to buy Ashtead shares for my portfolio now? Not necessarily. In fact, I think the stock actually looks quite interesting at present.
Ashtead generates a large proportion of its revenue in the US. Currently, it’s the second largest equipment rental company there with around 970 stores.
Right now, the US is embarking on a massive ‘reshoring’ initiative to boost domestic production and eliminate its supply chain vulnerabilities. It’s building new semiconductor manufacturing plants, new car manufacturing plants, and much more.
This reshoring process – which is likely to take years, if not decades, to play out – should provide huge tailwinds for Ashtead. Building all these new manufacturing plants is likely to create high demand for rental equipment. So the outlook for the FTSE 100 stock appears to be quite attractive, in my view.
Meanwhile, it trades at a reasonable valuation. Currently, analysts expect the group to generate earnings per share of $3.66 for the year ending 30 April 2023. At the current share price and exchange rate, that equates to a P/E ratio of about 16.
It’s worth noting that Ashtead is a cyclical company. If economic conditions continue to deteriorate, the company could be impacted negatively. It also has some debt on its balance sheet. This is another risk to consider.
Overall though, I think the long-term risk/reward skew here looks attractive. I’m thinking about buying a few shares for my portfolio.
