As investors we’re constantly being reminded of the need to keep our emotions in check, and in particular the psychological effects of fear and greed, as these can sometimes be the main drivers of irrational behaviour. But this is easier said than done, as it’s often these same feelings and emotions that prevent us from making rational and logical decisions, which can often lead to poor investment choices.
There are, of course, other emotions in play besides fear and greed, and one in particular I’d like to touch on today, regret. Looking back at missed opportunities and thinking ‘if only I had invested a few years back’ is a scenario that is played out over and over again. With that in mind, today I’ve picked out an unglamorous UK-listed company that I believe could turn out to be a very lucrative investment over the longer term.
All-time high
Plastic packaging specialist RPC Group (LSE: RPC) has performed reasonably well since I first recommended it at 747p back in 2016. Since then, the share price has soared 35% to all-time highs of 1,007p, before falling back to today’s levels around 800p. I view the recent share price weakness as a great buying opportunity to pick up shares in a company that has delivered shareholder returns in excess of 1,000% in less than 10 years.
The Rushden-based group is a leader in plastic products design and engineering for both packaging and non-packaging markets, boasting 32 innovation centres and 194 operations in 34 countries. The company develops and manufactures a diverse range of products for a wide variety of customers, including many household names, and enjoys strong market positions in many of the end markets and geographical areas in which it operates.
Innovative packaging
The £3bn business is now one of the largest plastic converters in Europe, combining the development of innovative packaging and technical solutions for its customers, while using a wide range of polymer conversion technologies in both rigid and flexible plastics manufacture.
During the first six months of the current financial year the FTSE 250-listed business delivered a remarkable 53% increase in revenues to £1,876m, with strong growth in both packaging and non-packaging products. This was driven by the contribution from acquisitions announced or completed in the previous financial year, along with underlying organic growth, polymer price tailwinds and favourable foreign exchange movements.
Priced to buy
Margins and profitability levels have improved significantly due to the contribution of acquisitions, the realisation of synergies, organic growth, lower exceptional costs, and foreign exchange benefits from a weaker sterling. As a result, adjusted earnings (before interest, tax, depreciation and amortisation) grew 49% to £296.1m, with adjusted operating profits climbing 58% to £214.7m.
With no let-up in growth on the horizon, and trading on a very modest forward earnings multiple of 11 for FY2018, RPC is a quality growth stock that looks priced to buy.