With many stocks falling in price due to tough macroeconomic conditions, one value stock that I’m considering for my holdings is Safestore Holdings (LSE: SAFE). Here’s why.
Self-storage solutions
Safestore is a self-storage business. It provides storage space for business and personal consumers for a variety of reasons. These can include businesses looking to store products to sell, or consumers looking to store personal effects. It operates throughout the UK and in Europe.
As with any value stock, I’m interested in the current share price and potential value at present and moving forward. As I write, Safestore shares are trading for 859p. At this time last year, they were trading for 1,120p, which is a 59% drop over a 12-month period.
Growth and returns potential
Reviewing Safestore, I believe the shares could provide returns at present, and these could become more lucrative and consistent in the future too. The current dividend yield stands at 3.45%. This is in line with the FTSE 100 average, despite Safestore residing on the FTSE 250 index. It also has an envious record of payout. In fact, it has increased dividends by 400% in the past decade! However, I am aware that dividends are never guaranteed.
Next, Safestore shares look excellent value for money at current levels on a price-to-earnings ratio of just six. This puts it firmly in the value stock category for me personally.
Reviewing past performance, I can understand why Safestore has been able to increase returns for so long. It has managed to grow revenue and profit for the past four years in a row. This is impressive. I do understand that any past performance is by no means a guarantee of the future.
From a growth perspective, after great success in the UK market, Safestore’s management is now looking to build its presence in the European market. It already has a presence here and is looking to boost this through joint ventures with other self-storage businesses throughout the continent. This is a bold move, and one that could see future earnings and returns boosted nicely.
A value stock not to be missed
Despite my bullish stance on Safestore, I must note a couple of risks that could impact its progress. To start with, it does have a bit of debt on its books. This is concerning as current rising interest rates mean servicing debt is costlier. This cost can impact investor returns and growth initiatives.
In addition to this, Safestore could find that acquiring new spaces for growth is costlier currently too, due to rising interest rates. The rising cost of new space could eat away at profit margins that underpin returns and growth plans.
Overall, I like the look of Safestore shares and it looks like a great value stock to me at present. I would be willing to buy some shares when I have the spare cash to do so. The passive income opportunity on offer, growth plans, as well as record of performance, all helped me come to my conclusion.
