Howden Joinery Group (LSE:HWDN) has seen its shares pull back in recent months, like many other FTSE 100 stocks. This has been caused by macroeconomic headwinds and the tragic events in Ukraine. With this recent dip, I have been wondering if Howdens shares could be a good choice for my portfolio right now.
Growth stock
Howdens is best known as the UK’s largest trade kitchen supplier. It also sells a range of other joinery, hardware, and appliance products to trade and DIY customers. Howdens has impressively grown to 700 locations in the UK and throughout Europe and shows no signs of slowing down.
So what’s the current state of play with the Howdens share price? Well, as I write, they’re trading for 609p. At this time last year, the stock was trading for 889p, which is a 31% drop over a 12-month period.
Howdens shares have risks
Soaring inflation has led to a spike in the cost of materials. Furthermore, the global supply chain crisis has had a material impact on operations. With costs rising, profit margins are being squeezed tighter than ever. When costs are passed to customers, there is always the risk of them looking for cheaper alternatives away from Howdens.
I invest for the long term. Although I do believe the above mentioned issues are short to medium term, no one can truly tell when they may subside. All these issues could affect investment viability as well as growth prospects ahead.
The bull case and my verdict
So let’s take a look at some positives. Straight off the bat, Howdens’ position in a burgeoning market is a positive factor. It has the largest market share of the kitchen sector here in the UK. Furthermore, it continues to build its presence throughout the country and in Europe. This position should allow it to continue to perform, grow, and drive investor returns.
The fact Howdens operates in a growing market is positive too. Infrastructure construction and house building is booming, especially in the UK. Thinking of Howdens kitchens as the number one provider in the UK, I believe it should benefit from the current house building market. There is a shortage of homes in the UK, with demand outstripping supply. Initiatives to boost the number of homes could benefit a firm like Howdens, and in turn boost performance and returns.
So what about some of Howdens’ fundamentals such as performance? Well, I can see it has a positive track record although I do understand past performance is not a guarantee of the future. Underpinned by this performance has been large-scale growth, with the number of depots increasing from 14 in 1995, to over 700 currently.
Howdens shares look decent value for money, especially after the recent pullback. The shares are on a price-to-earnings ratio of just 11. In addition to this, they would boost my passive income stream through dividend payments. The dividend yield, as I write, is over 6%. This is higher than the FTSE 100 average of 3%-4%. Dividends can be cancelled at any time, however.
I believe Howdens shares are a FTSE 100 opportunity not to be missed. With the shares pulling back in recent months, I decided to add some shares to my holdings.