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the rise of FTSE 100 headline B&M (LSE: BME) has been nothing short of amazing, in my opinion. However, I think the stock still has a way to go.
Here's why I would buy the stock in a heartbeat if I could only pick one stock to buy right now!
B&M has grown from humble beginnings in 1978 to become a FTSE 100 powerhouse by 2023. The company's growth trajectory through acquisitions and organic growth should be a model for other companies, in my opinion.
So what is currently happening with B&M stock? As I write, they are trading at 581p. This time last year they were trading at 391p, up 32% over a 12-month period.
I'm impressed, especially as many other FTSE shares have struggled amid the macroeconomic turbulence.
The bull and bear case
The rise of discount retailers has made it easier for companies like B&M to capture market share and grow. After all, everyone loves a bargain (I know). Additionally, the recent cost of living crisis has highlighted food inflation and the need to look for cheaper alternatives. B&M has seen its profitability skyrocket in recent times, which has boosted the stock and its investment viability.
Another aspect that impresses me is B&M's growth strategies. Aside from smart acquisitions (and the slew of new locations it continues to open to expand its footprint), it has invested in itself. I'm talking about the move to a new head office and the ongoing plans to open new and improved state-of-the-art distribution centers to give itself the best chance of success, and how it has done so!
Moving on to some fundamentals, B&M shares still look like good value to me at the moment with a price-to-earnings ratio of 17. This is even after its impressive rise in share price. Furthermore, a dividend yield of over 6% is higher than the FTSE 100 average of 3.9%. However, I understand that dividends are never guaranteed.
When looking at potential risks, I'm always wary of acquisitions, regardless of a company's track record of success. When acquisitions work, they are great. But when they don't, fixing a costly mistake can have untold damage to the bottom line as well as investor confidence.
Lastly, B&M stock and performance have been soaring for some time now, but what happens when the economy is in better shape? Could we find discount retailers going out of style as more people can afford premium products again? There is a slight risk of this happening, but I'm not worried. This is because there will always be those looking for bargains, as well as low-income households looking to take advantage of discount stores and stretch their budgets to the max.
Final thoughts
There are certain FTSE shares I wish I had bought much sooner, even years ago. B&M is definitely on that list.
However, I think there is still a chance to buy some shares. If the business continues to grow at the same rate it has, there is no telling how well it could do and how big it could become!
